Judicial institutions, local protection and market segmentation: evidence from the establishment of interprovincial circuit tribunals in China

Zhao, Da, Yu, Ao and Guo, Jingyuan (2022) Judicial institutions, local protection and market segmentation: evidence from the establishment of interprovincial circuit tribunals in China. China Economic Review, 75. ISSN 1043-951X

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Abstract

A central challenge in economic development is market segmentation (MS) within countries, which largely arises from judicial local protection(JLP). By taking advantage of China's establishment of interprovincial circuit tribunals (ICTs) that separate the judicial system from local governments, we find that: (1) ICTs significantly rectify the JLP provided by lower-level courts. (2)A micro-mechanism analysis shows that ICTs decrease transportation costs of cases involving small and private enterprises as plaintiffs and increase their probability applying for retrials in the Supreme People's Court (SPC). In combination with the fact that these enterprises are more likely to be discriminated against by lower-level courts, the rectification effect of ICTs becomes significant after the reform. (3)Consistently, although ICTs significantly decrease the MS between provinces within the same circuit area, the MS between provinces of different circuit areas barely changes. Our paper provides timely implications and potentially actionable insights for countries facing similar concerns.

Item Type:	Article
Additional Information:	© 2022 Elsevier Inc.
Divisions:	Economics
Subjects:	H Social Sciences > HB Economic Theory
JEL classification:	K - Law and Economics > K4 - Legal Procedure, the Legal System, and Illegal Behavior > K40 - General O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O17 - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements: Legal, Social, Economic, and Political P - Economic Systems > P3 - Socialist Institutions and Their Transitions > P37 - Legal Institutions; Illegal Behavior P - Economic Systems > P4 - Other Economic Systems > P48 - Political Economy; Legal Institutions; Property Rights
Date Deposited:	08 Aug 2022 16:18
Last Modified:	16 Nov 2024 20:30
URI:	http://eprints.lse.ac.uk/id/eprint/115925

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