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The Relevance of Judicial Procedure for Economic Growth

Bernd Hayo and Stefan Voigt ()

No 200828, MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

Abstract: It has been argued that procedural formalism undermines economic efficiency by fostering rent-seeking and corruption. We challenge this view by arguing that a number of judicial procedures foster economic growth by increasing the predict-ability of court decisions, which leads to more transactions and higher investment levels. We investigate the effects on economic growth of 15 judicial procedures. Employing a standard growth model, we find in a cross-section of 67 countries that timeliness, written—as opposed to oral—procedures, and the right to counsel have a positive effect on growth, whereas the number of independent procedural actions as well as the presumption of innocence have negative effects. Our results partially contradict the results of former studies based on the Lex Mundi dataset.

Keywords: Judicial procedure; legal formalism; judicial Independence; rule of law; investment; growth. (search for similar items in EconPapers)
JEL-codes: H11 K40 P51 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fdg and nep-law
Date: 2008
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