Legal Doctrine and Political Control

We model legal doctrine as an instrument of political controlby higher courts over lower courts and the case outcomes theyproduce. We focus on the choice between determinate and indeterminatedoctrines within a hierarchy of courts where political–ideologicalalignment between lower and higher courts varies. We show thatthe choice over doctrinal determinacy depends on the distributionof cases, the distribution of litigants, judicial types, andthe level of policy alignment between higher and lower courtjudges. The model suggests the optimal doctrinal choice fora high court, given the political–ideological alignmentbetween the high court and the lower court, the control characteristicsof doctrines themselves, and the matching of doctrines to litigantpools. This has implications regarding preference divergencewithin the judicial hierarchy, the interaction of differentdoctrines, and interplay between doctrinal specificity and doctrinalreach.     

Court Efficiency and Procurement Performance

Disputes over penalties for breaching a contract are often resolved in court. A simple model illustrates how inefficient courts can sway public buyers from enforcing a penalty for late delivery in order to avoid litigation, thereby inducing sellers to delay contract delivery. By using a large dataset on Italian public procurement, we empirically study the effects of court inefficiency on public work performance. Where courts are inefficient, we find the following: public works are delivered with longer delays; delays increase for more valuable contracts; contracts are more often awarded to larger suppliers; and a higher share of the payment is postponed after delivery. Other interpretations receive less support from the data.     

Understanding modes of civil case disposition: Evidence from Slovenian courts

We contribute to the scant empirical literature on the functioning of courts in the post-socialist world by analyzing civil case disposition in Slovenia. We first characterize basic empirical patterns in modes of civil case disposition in Slovenian local courts. We then examine court-level determinants of the incidence of in-court settlements versus trial-based judgments. Consistent with the theory that both judges and disputing parties take into account their respective private benefits and costs when choosing their preferred mode of case disposition, we find evidence that the incidence of in-court settlements versus trial-based judgments increases with the number of all case filings per judge. Thus, court resources and demand for court services influence not only total court output, as previously established in the literature, but also how cases are disposed of.     

Courts and Firm Investments in Real Property

The legal environment and rule of law are important for business, but existing studies often treat rule of law holistically. This article examines the role of courts, specifically the speed of court decisions, the enforcement of edicts, and the impartiality of decision-making as perceived by firms of various sizes, and the impact this has on firm investments in real property. The article analyzes a panel of 6,300 firms from 27 countries in the period from 2002 to 2009 to find that (i) firm size affects perceptions positively, while (ii) paying bribes affects perceptions negatively. At the same time, (iii) a firm’s connections to the government have no apparent impact. More importantly, while all three components have a positive correlation with the amount firms invest in land and machinery, the speed of courts has the greatest significance and the highest marginal effect. Firms perceiving courts to be quick invest nearly four times as much as the average real property investment. This finding suggests that policymakers should focus on reducing backlogs in the court system, perhaps by encouraging more arbitration or staffing more clerks.     

How German Labor Courts Decide: An Econometric Case Study

Abstract. Courts are an important element in the institutional framework of labor markets, often determining the degree of employment protection. German labor courts provide a vivid example in this regard. However, we know relatively little about court behavior. A unique dataset on German labor court verdicts reveals that social and other criteria like employee characteristics, the type of job, local labor market conditions and court composition influence court decisions. At least as striking is that workers' chances to win depend on where and when their cases are filed. This generates considerable ex ante uncertainty about outcomes.     

制度跃迁视角下知识产权审判专门化与企业创新

企业创新离不开制度支持,但现有关于制度影响企业创新的研究主要基于组织合法性理论,并以静态的制度框架为出发点。从诺思制度变迁理论视角,探讨动态的制度变迁环境如何影响企业创新,以2014年中国知识产权审判专门化改革为背景事件,构建准自然实验,研究发现：改革所建立的知识产权法院是制度变迁过程中一次典型的制度跃迁,对于企业创新绩效具有显著提升作用;在异质性检验中发现,知识产权法院的建立显著增加民营企业和高科技企业的实质性创新成果,北京知识产权法院的建立对于企业创新绩效的提升作用更显著;在机制检验中发现,知识产权法院的建立能够缓解企业融资约束,增强企业创新意愿,从而提升企业创新绩效。从诺思制度变迁理论视角解读中国从法制到法治建设的制度变迁过程及其影响,为推进国家治理体系和治理能力现代化提供参考。     

Courts,scheduled damages,and medical malpractice insurance

We study how the functioning of the judicial system affects the availability and affordability of medical liability insurance, as proxied by the number of insurers and the premiums paid. We use two unique datasets collected in Italy from 2000 to 2010. Using the first dataset—insurance contracts for hospitals—we estimate the average treatment effect of schedules on insurers and premiums paid, conditional on judicial efficiency and proxied by different measures. Our identification rests on the partial overlap between healthcare districts and judicial districts, meaning that the caseload of a court and malpractice events at the healthcare provider level are not perfectly correlated. On average, the adoption of schedules does not produce any significant effect on insurers or on premiums paid. However, adopting schedules has a robust and significant effect on the number of insurers, but only in inefficient courts. We further investigate these findings using a second dataset comprising 17,578 malpractice insurance claims. We find evidence of a composition effect among claims that is triggered by higher levels of judicial inefficiency: As a court’s inefficiency increases, the likelihood for a case to not be decided on the merits decreases and the levels of reserve and recovery per claim decrease.     

Delegation in a multi-tier court system: Are remands in the U.S. federal courts driven by moral hazard?

Appellate judges face a trade-off when deciding whether to remand cases: delegating the decision power enables to transfer effort costs to the lower court, but may be costly in terms of ideological preferences and reputation costs. Our empirical analysis of federal cases reveals that this trade-off creates a ‘Subsequent Remand Effect’: cases remanded by the Supreme Court to appellate courts are far more likely to be subsequently remanded to district courts, compared to other cases. This effect varies with judicial ideologies, suggesting that the tendency to (subsequently) remand might be driven by moral hazard problems rather than case-relevant attributes.     

Regulatory chill and the effect of investor state dispute settlements

Legal conflicts between multinational firms and host governments are often decided by international arbitration panels—as opposed to courts in the host country—because of provisions in international investment agreements known as investor state dispute settlements (ISDS). Critics fear that investor protection such as ISDS make governments reluctant to adopt appropriate policies (regulatory chill). In this paper I develop a theoretical model in which the outcome of cases brought to court is uncertain owing to the vagueness of the law protecting investors and a court's inability to correctly identify a state of nature with certainty. I show that from a world welfare perspective there is no underregulation, only an overregulation problem. However, from a national welfare perspective “frivolous” lawsuits may lead to regulatory chill. I also identify conditions under which ISDS can lead to a Pareto improvement that involves simultaneous changes in compensation payments and protection rights relative to a national court.     

NONMARKET VALUATION AND THE COURTS: THE CASE OF THE EXXON VALDEZ

This paper examines a natural resource damages case, the Exxon Valdez, and contrasts the use and acceptance of market and nonmarket valuation methods in two related sectors: commercial fishing and Alaska native subsistence use of fish and wildlife. Much economic literature focuses on how, in principle, one should value environmental injury. These principles and methods have been codified in the Department of Interior and National Oceanic and Atmospheric and Administration natural resource damage regulations that implement the Comprehensive Environmental Response, Compensation, and Liability Act and the Oil Pollution Act of 1990. However, these liability rules are fairly new, and thus little evidence exists on the acceptance of valuation methods by the courts and juries. In this regard, the Exxon Valdez case is of particular interest because substantial resources were at stake and much of the case went all the way through to a jury verdict. The two major plaintiff classes—commercial fishermen and Alaska natives—are market and nonmarket versions, respectively, of otherwise fairly similar economic sectors. However, the court's acceptance of the "correct in principle" valuation methods appropriate to each sector was asymmetric. The court accepted as admissible the market valuation procedures (primarily "diminution in market price") used by the commercial fish experts but rejected the nonmarket valuation procedure applied to subsistence uses (a hedonic price model).     

The British and American Rules: an Experimental Examination of Pre-trial Bargaining in the Shadowof the Law

A commonly held view is that the frequency and value of pre-trial settlements in civil disputes are greatly influenced by the cost allocation regime that is in place if the case goes to trial. There is a large and growing theoretical literature on this subject but almost no empirical evidence. This is due simply to the scarcity of relevant data owing to the confidentiality generally associated with such matters. However, the area is an ideal one to analyse experimentally. In this paper we consider the effect of the British and American rules for cost allocation using such an experimental methodology. We find that the two rules produce no difference in the frequency of pre-trial settlements but that the British rule produces higher settlements (pro-pursuer) if the probability of the pursuer winning is large.     

Strategic Judging Under the U.S. Sentencing Guidelines: Positive Political Theory and Evidence

We present a positive political theory of criminal sentencingand test it using data from the U.S. Sentencing Commission.Under the U.S. Sentencing Guidelines, judges can use "offense-leveladjustments" (fact-based decision making) to lengthen or shortenthe Guidelines' presumptive sentences. Judges also can use "departures"from the Guidelines (law-based decision making) to lengthenor shorten sentences. In general, departures are reviewed morestrictly than adjustments by circuit (appeals) courts. Our theorypredicts that a sentencing judge politically aligned with thecircuit court will be more likely to alter sentences throughsentencing departures than a judge not so aligned with the circuit;by contrast, our theory predicts that judges can more freelyuse fact-oriented adjustments to alter sentences, regardlessof the circuit court's sentencing policy preferences. Our analysisof federal sentencing data largely supports the theory's predictionsregarding the use of adjustments and departures and the impactof political alignment between higher courts and sentencingjudges.     

Authoritarian transparency: China's missing cases in court disclosure

The question whether authoritarian regimes use transparency initiatives to improve public governance or only to perform window dressing remains open. To address it, we examine a recently promulgated transparency policy in China that mandates public access to all judicial opinions. We find that local courts fail to disclose more than 60% of their opinions in corporate litigation cases, measured against a baseline of publicly listed firms’ disclosure of their litigation, as required and enforced by the securities regulations. Instead of upholding judicial fairness, local courts disclose cases selectively, displaying favoritism and responding to private incentives. Courts are more likely to suppress the publication of their opinions when the firm involved in the litigation is state-owned or is the defendant in its home court, especially in the year before the promotion of the provincial party secretary. We also find that firms whose cases are disclosed by the courts undergo adverse economic consequences, signaling that they have fallen out of favor with the government.     

Panel Composition and Judicial Compliance on the US Courts of Appeals

This article integrates the literatures on judicial compliance,panel decision making, and case selection in the federal judiciaryhierarchy. Many studies have speculated that "panel effects"—thephenomena under which an individual judge's vote may dependon her colleagues on a three-judge panel—can be tied toa "whistleblower effect," through which a lower court judgecan constrain a panel majority from disobeying with SupremeCourt precedent by threatening to dissent. However, no studyhas systematically found such a relationship. I present a game-theoreticmodel of circuit court-Supreme Court interaction that demonstrateshow panel composition might affect the likelihood of lower courtcompliance to Supreme Court doctrine. The model illustrateshow three-judge panels, while not inducing perfect doctrinalcontrol of lower courts by the Supreme Court, significantlyincreases the latter's ability to see its preferred doctrinecarried out by its subordinates in the judicial hierarchy.     

Are judges biased by labor market conditions?

When a firing litigation is taken to court, only the characteristics of the employee's misconduct should be relevant for the judge's decision. Using detailed data from an Italian bank and aggregate macro data, this paper shows that, instead, local labor market conditions influence the court's decision: The same misconduct episode may be considered sufficient for firing in a tight labor market but insufficient otherwise. We reach this conclusion after taking carefully into consideration the non-random selection of firing litigations for trial. Although these results refer to the specific situation considered, they raise more general issues. For macroeconomists they suggest that higher unemployment rates may increase firing costs via the effect on courts’ decision criteria; thus, the real extent of firing rigidities cannot be assessed without considering the role of courts. For labor law scholars, these findings are important because, following traditional principles, the law should be applied in the same way for all citizens and over the entire national territory.     

Club governments versus representative governments

The paper compares the legal rules for private clubs with the constitutions of representative governments. Though both institutions are designed to provide public goods for their members they are organized quite differently. In clubs the power to grant power must not be delegated to the agents, while in representative governments it usually is. The design of representative governments is shown to be inconsistent with a contractarian view of the constitution. A nearly perfect laboratory case for a club government can be found in the example of Switzerland. In this country citizens are absolute sovereigns over their constitution. The Swiss do not have a constitutional court, but have developed instead a system of popular voting rights serving as a substitute for a judicial review by a constitutional court. Though this system does not work perfectly, it has relative advantages compared to a constitutional court which often tends to become a political decisionmaker. The author is indebted to Pio Baake, Peter Moser, and Richard E. Wagner for helpful comments.     

Courts at work: Bankruptcy statutes,majority rule and private contracting in England (17th–18th century)

Rather than evolving as a platform for renegotiation and debt discharge, as on the Continent, English bankruptcy emerged as a liquidation-only procedure after majority arrangements among creditors were banned in 1621. Over the course of the 17th and 18th centuries, the courts then developed an alternate, private-law set of rules on the basis of the old English trust and the Composition agreement, which belonged of the medieval cross-European Law Merchant. The main advantage of this little-known institution was its perpetual character and the flexibility of its governance, and its main drawback was obviously the requirement of voluntary initial adhesion. Symmetrically, under the Continental model, collective action was easier to obtain but it did not extend beyond the doors of the court. The discussion brings forward two further themes: the symmetry between adjudication and voluntary adhesion to a collective contract; and the capacity of judges to invent new legal concepts out of diverse set of existing rules, rather than through the simple, bottom-up approach usually emphasised by the literature on the Common Law tradition.     

Contribution-proportional remuneration rule for employee inventions and its effects on effort and investment incentives

The practice of the Japanese court in case of a dispute between the employer and employee regarding the amount of remuneration for an employee invention has been to order that the additional profit from the invention be divided proportionally to their respective input contributions. We show that, if the employer’s investment and employee’s effort are weakly complementary, this rule causes the share effect (excessive incentives on the part of each party to expend investment or effort in order to increase his/her share of the surplus) to dominate the probability effect (insufficient incentives arising from the fact that each party obtains only part of the increase in the expected surplus), and thus leads to excessive investment and effort relative to the joint-payoff-maximising levels. If the court cannot capture the employer’s investment as fully as the employee’s effort, the employer’s investment may be too low compared to the joint-payoff-maximising level.     

The Independence of the Italian Constitutional Court

It is often asserted that the Italian Constitutional Court is not independent of the Executive and Legislative branches of the government in Rome. We offer a view of independence that is congruent with bodies such as constitutional courts. We argue that the evidence, both qualitative and quantitative, however poor it may be, indicates that the Italian Constitutional Court is as independent as any other corresponding constitutional or supreme court of democratic countries. The evidence is not directly conclusive because the question, in the end, is not whether the judges, one by one, are independent, but whether the Court is independent. The evidence we offer pertains mostly to judges. If judges are independent, as that evidence seems to indicate, the Court is a fortiori even more independent.     

QUALITY-ASSURING PRICE AND BREACH OF EXPRESS OR IMPLIED WARRANTY

If consumers cannot discern quality prior to purchase, firms may use both court enforcement and the market mechanism to assure quality. But the level of warranty protection that firms choose to offer depends on the efficiency of the market. As the ability of consumers to communicate information concerning quality among themselves (market efficiency) increases, the level of warranty protection that maximizes consumer surplus falls. In highly efficient markets, producers do not offer a warranty. Thus, courts should not imply a warranty if producers do not specify one. In addition, the level of warranty protection depends on the courts' ability to distinguish between producer and consumer moral hazard.