This study undertakes a meta-analysis of the relationship between legal institutions and economic growth based on 1,074 estimates extracted from 121 studies. The results show that the existing literature consistently reports a positive association between legal institutions and economic growth. At the same time, although simple comparisons suggest differences in effect sizes across legal domains, these differences are not robust once study characteristics are jointly controlled for in the meta-regression analysis. These findings suggest that apparent differences across legal domains may largely reflect variations in empirical conditions and the conceptual overlap of commonly used legal indicators, rather than intrinsic differences in their relationships with economic growth.
Under what conditions do judges favor their own group? Collecting the available universe of Superior Court decisions in Kenya, we leverage the random assignment of cases to judges to evaluate the extent of judicial in-group bias along gender and ethnic lines. We find that defendants are 4 or 6 percentage points more likely to win if they share the judge’s gender or ethnicity, respectively, and that judges are significantly more biased in favor of defendants than plaintiffs. Our findings highlight the need to re-examine the emerging consensus that judges uniformly favor their own group and continue investigating the mechanisms driving judicial bias. We propose that the uneven application of bias is consistent with a framework combining social identity and loss aversion, and we present suggestive evidence from data on the amount of damages in each case. We argue that this framework offers one plausible lens through which to interpret the cognitive underpinnings of judicial bias, and that further work is needed to establish its general applicability.Significance Statement:This study analyzes judicial bias in Kenya’s Superior Courts, using 29,363 civil cases from 1976-2020. We reveal judges’ significant in-group bias toward defendants based on gender and ethnicity through quasi-random case assignments. Our findings challenge the belief that judicial bias is uniformly applied, suggesting instead that selective biases exist. By combining social identity theory with prospect theory, we offer a framework that is consistent with the asymmetric pattern we document. These insights deepen understanding of cognitive influences on judicial decisions and underscore the need for reforms to enhance fairness and equity in judicial systems.
More than fifteen years after Oliver E. Williamson’s 2009 Nobel Prize, this article takes stock of transaction cost economics and maps its future. Drawing on a bibliometric analysis of 67,841 papers citing Williamson’s work between 1975 and 2025, we document a research programme that is neither exhausted nor unchanged: the share of citing papers that engage substantively with the framework (deploying core transaction-cost concepts rather than citing Williamson in passing) has fluctuated within a narrow band of three to five per cent for three decades, yet its conceptual centre of gravity has migrated from vertical integration and hierarchies toward outsourcing and hybrid governance, and its geography has shifted beyond the North-American founding generation. Building on this evidence, we propose two research agendas for the next fifteen years: a dynamic reformulation of the framework, in which governance transitions and transaction costs themselves become objects of strategic design, and an extension to the frontiers where these dynamics are most acute, from decarbonisation infrastructure and outcome-based contracting to geopolitical fragmentation and contract automation.The six contributions gathered in this special issue put this agenda to work, combining a reassessment of Williamson’s conceptual legacy with applications to contemporary governance problems in environmental regulation, procurement, local public services, bidding markets, and municipal finance.
Chief justices of India are unique institutional actors. They possess administrative powers that other judges lack. As the Masters of Roster, chief justices appoint panels that adjudicate petitions. How do they exercise this power? Our analysis unmasks Indian chief justices as strategic actors. Data on panel selection over two decades demonstrates how chiefs deploy two strategies as they approach retirement. First, they convene discretionary panels that disproportionately favour governments. Second, they adjudicate more in favour of governments. Indian chief justices, in this context, resemble those of Canada, South Africa, and similar jurisdictions. Besides, they are more likely to secure post-retirement jobs from governments. Cumulatively, this analysis shows why the power to select panels is too awesome-its impact too material-to confine it to lone office holders.
Efficient institutional mechanisms play a pivotal role in guiding distressed firms through crises and preventing bankruptcy—thereby reducing unemployment, mitigating economic downturns, and stabilizing cyclical fluctuations. This paper examines two distinct institutional mechanisms for restoring the operating capabilities of financially distressed firms: one is major asset restructuring, which leverages the resource allocation functions of financial markets, and another is bankruptcy reorganization, which operates within a legal framework designed to balance the interests of diverse stakeholders. Our findings indicate that bankruptcy reorganization outperforms major asset restructuring in restoring the operating capabilities of financially distressed firms. This superior performance likely stems from better ability of bankruptcy reorganization to lower debt financing costs and enhance cash flow. However, some features inherent to bankruptcy reorganization—such as provisions allowing the transfer of shares to ordinary creditors for repaying debt—may hinder a distressed firm’s recovery. Further analysis reveals that strategic and bank investors tend to adopt a passive stance during bankruptcy reorganization.
Concealing illicit funds through hidden ownership is a well-known money laundering method. This paper analyzes whether non-transparent ownership receives sufficient attention relative to other red flags of money laundering, using a randomized discrete choice experiment of 334 Norwegian anti-money laundering (AML) professionals. The results show that while unknown beneficial ownership increases the odds that a transaction is reported as suspicious, it increases reporting odds by only about half as much as unknown origin of funds. This suggests that although non-transparent ownership is considered a primary red flag of money laundering, and despite the increased attention this issue has received by international policymakers, non-transparent ownership may still receive insufficient attention by AML professionals. Paradoxically, our analysis indicates that industry professionals consider the AML reporting system to be well-functioning as there are no major differences between which transactions respondents say are reported and which transactions should be reported to combat money laundering.
While the emerging empirical literature shows that collateral tax sanctions (CTSs) - such as driver’s license suspensions or passport denials - appear to be effective instruments to enforce tax debt collection, there are still few theoretical arguments to explain why. In this paper, I model enforcement of tax debt collection and provide a new rationale for why it could be efficient to use CTSs in combination with monetary fines. I argue that a CTS influences a debtor immediately after its imposition and affects more strongly those debtors who have higher chances of escaping debt payment, which is in contrast to the monetary fine that is often delayed in payment and non-enforceable. I show that, in a model where debtors might be temporarily income constrained to various degrees, this prompt influence of CTSs may be critical when debtors differ in ability to escape debt payment. It is because CTSs help target the punishment toward tax debtors who delay payment to avoid debt, rather than those who delay payment due to limited income. According to the numerical calculations, CTSs are socially optimal if the share of income-constrained tax debtors is not too large or high-income individuals are sufficiently wealthy.
The Committee on Foreign Investment in the United States (CFIUS) is a governmental body that can deny regulatory approval of foreign takeovers on national security grounds. We examine whether and how takeover restrictions imposed by CFIUS affect corporate investment of peer firms. We document a sharp increase in CFIUS denials of regulatory approval during the 2008-2019 period in which the Foreign Investment and National Security Act (FINSA) was in place. CFIUS denials are followed by a negative market reaction, a decrease in foreign takeovers, and a reduction in corporate investment across target firms' industry peers. The decreases in corporate investment are more pronounced among peer firms that are financially constrained and that rely more on foreign investments. These findings deepen our understanding of the effects of foreign takeover restrictions on corporate investment of peer firms in the United States.
Drawing on over 360,000 Chinese court records, we employ a regression-discontinuity-in-time (RDiT) design to examine a top-down reform intended to prevent local governments from pressuring courts to decline administrative litigation cases upon submission. We find that while the total number of cases spiked briefly following the reform, increases in the volume of sensitive land-related disputes have remained stable. Meanwhile, while cases are increasingly dismissed without a formal judgment, plaintiffs who reach trial are significantly more likely to win. Combining quantitative results with qualitative evidence, we argue that Chinese local courts strategically utilize top-down mandates to pursue a subnational separation of powers. Such campaign-style reforms can produce lasting change by allowing the judiciary to gain leverage over the executive branch. While citizens' access to justice remains subject to selective gatekeeping, the continued practice of conditional justice suggests a reduced political embeddedness of local courts.
Local public investment is a key driver of infrastructure provision and long-term growth. Hence, understanding investment financing choice is paramount. Unlike central governments, most local authorities face a narrow choice between debt and tax funding, subject to fiscal rules and financial market access constraints. To analyze this choice, we transpose Williamson (1988)'s corporate finance framework, which views financing as a governance decision aimed at minimizing transaction costs rather than as market neutral or an agency conflict. In this adaptation to public finance, debt corresponds to rules-based, market governance, while tax funding represents hierarchical, discretionary governance. In stable environments, debt dominates; under instability, the ranking reverses. We test these propositions using France's local public debt crisis that began in 2010, triggered by municipalities' exposure to toxic structured loans. Using a panel of 35,000 municipalities (2000-2018) and a distance-based instrumental-variable strategy, we find that before the crisis, structured loans did not alter investment behavior, but after the crisis, exposed municipalities sharply curtailed investment and re-ranked their financing choices away from borrowing toward higher self-financing. These results highlight the governance nature of local financing decisions and extend Williamson's corporate finance framework to public finance.
This study investigates whether judicial independence can restrain corporate fraud. We take a unique personnel and financial reform in China’s local courts, which shifts the power of financial management and local judge appointment from municipal governments to the provincial level, as a natural experiment. This reform significantly strengthens the judicial independence of the local courts. Collecting data from Chinese A-share listed firms from 2011 to 2021 for empirical analysis, we find that this staggered judicial independence reform significantly restrains corporate fraud. Our mechanism analysis suggests that the judicial independence reform restrains corporate fraud by breaking local judicial protectionism, improving corporate governance, and relaxing financial constraints. This effect is more pronounced for state-owned enterprises, firms with political connections, and firms in poor legal environments. Overall, our research provides new evidence on how judicial independence restrains firm fraud, which provides important policy implications.
This study examines optimal evidence rules when self-interested law enforcers may strategically distort evidence to increase conviction rates. Although law enforcers can strategically distort evidence, the analysis demonstrates that appropriate evidentiary thresholds can induce truthful reporting, thereby extracting useful information and reducing expected legal error costs from wrongful convictions and erroneous acquittals. This is particularly important when the defendant’s guilt is uncertain. The analysis extends to judicial discretion in sentencing. We show that allowing courts to impose lighter sanctions can minimize legal error costs when such sanctions reduce error costs and guilt is uncertain. This provides a justification for judicial discretion under self-interested law enforcement.
This study examines the roles of institutional investors in corporate restructuring decisions. We expand the existing empirical literature by using a multinomial logit model with instrumental variables to evaluate the three-way choice of distressed firms between exchange offers, ‘freefall’ Chapter 11, and ‘prenegotiated’ Chapter 11. In addition, we consider a comprehensive list of institutional investors and assess the impact of their equity and debt holdings on restructuring outcomes. Using a unique sample of 74 Chapter 11 freefall cases, 57 prenegotiated Chapter 11 cases, and 138 exchange offers from 2000 to 2018, we find that equity holdings by government, individual, investment advisors and pension funds are positively related to exchange offers and negatively to freefall plans. In contrast, bond holdings by bank, hedge fund, and VC/PE investors are negatively related to exchange offers and positively to freefall or prenegotiated plans while the inverse holds for insurance companies. In addition, assets to liabilities and interest coverage ratios are strongly associated with exchange offers, while higher short-term debt and EBIT margins correlate with freefall and prenegotiated plans. Our results underscore the critical role of investor type in shaping corporate restructuring strategies.
In the Netherlands, the number of commercial court cases has been declining since the end of the 2008 financial crisis. A similar decline is observed in other countries. The reasons for this decline are not well understood. Therefore, we investigate to what extent this decline is related to the business cycle and to what extent it is related to structural factors. To address this question, we use administrative data provided by the Dutch judiciary that enables us to separate cases by type of dispute. This disaggregation makes it possible to differentiate a type of case that is closely linked to the business cycle (debt collection) from a type that is not (tort). We perform regressions on the volume of these different types of cases while controlling for firms’ fixed effects. Our results indicate that, while the decline is the result of a combination of business cycle and structural factors, structural factors dominate in contentious litigation. The interviews with experts indicate that the structural decline is due to both the expansion of new technologies that increased information availability and the increased centralization of firms.
Building mainly on Coase (but also Arrow, Barnard, Simon, and many others), Williamson played a central role in the establishment and academic recognition of the economics of organizations and more generally the economics of institutions. Over numerous contributions, he introduced and/or enriched a set of interdependent concepts regarding transactions, rights, and contracts, defining the “golden triangle” of New Institutional Economics. The resulting framework provides solid theoretical ground to the analysis of the many alternative ways to organize the transfer/allocation of rights through transactions and delivered what became a key explanation to the trade-off among alternative organizational solutions faced by decision-makers. In doing so Williamson pointed out the need for an in-depth revision of traditional micro-economics and opened room for the analysis of the governance of these different structures, at the junction of economics, management, and sociology. It also led Williamson to consider the institutional embeddedness of all these micro-institutions, contributing to bridge the gap with the “macro-variant” of NIE personified by Douglass North. Williamson explored this connection mainly through the case of regulation, thus establishing links between economics and the law. In all these aspects his legacy has been and remains a source of lasting influence.
This study examines the impact of the EU Remedies Directive on the prevalence of direct awards in public procurement. Strengthening bid protest mechanisms should, in theory, curb the use of direct awards by increasing the likelihood that aggrieved bidders challenge such decisions. Using a difference-in-differences approach, exploiting the staggered implementation of the directive across EU countries, we test this hypothesis using a large database of public procurement contracts. We find a strong deterrent effect for public buyers with a high initial propensity to use direct awards. For this group, the directive led to a reduction in direct awards exceeding 50 percentage points within two years of implementation. These results highlight the effectiveness of private enforcement mechanisms in shaping procurement behavior, yet indicate that such measures may also discourage the justified use of direct awards.
This paper examines how insurance considerations should influence the design of liability rules, based on the realistic assumptions that individuals are risk-averse and that private insurance is costly. Empirical evidence indicates that insurance contracts often carry substantial loading factors—ranging from 30% to 40%—and that individuals display marked risk aversion when exposed to uncertain losses. These features have important normative implications for tort law. Under a negligence regime, risk aversion and costly insurance justify raising the standard of care. Under strict liability, the victim’s limited access to affordable insurance supports higher damage awards. The analysis advances the argument that courts should not evaluate precautionary behavior solely based on its expected harm reduction, but rather on its insurance value—namely, its capacity to protect risk-averse parties from uncertain losses.
We examine the effectiveness of court-annexed mediation (CAM) in facilitating case disposition, drawing on nearly 380,000 civil and commercial disputes adjudicated in Slovenian first-instance courts between 2009 and 2023. To address CAM's endogeneity, we leverage a rich set of covariates and combine propensity score estimation with matching and parametric analysis. Conducting CAM, on average, reduces case duration by 12 % (42 days based on sample mean) and raises the likelihood of settlement by 25-32 percentage points (60-176 % of mean settlement probability, depending on the definition). CAM's effect, however, varies considerably across different cases. CAM significantly reduces duration in commercial, intellectual property, damages, and enforcement lawsuits, as well as in cases filed during backlog periods and in courts that adopted CAM early. By contrast, we find no effect of CAM on duration in disputes involving five or more parties. CAM improves settlement prospects across all examined case groups-especially in small-value claims, commercial and enforcement lawsuits, and disputes in which neither party is represented by an attorney. Notably, the key determinant of whether CAM is offered and conducted is the identity of the presiding judge, underscoring the critical role judges play in driving CAM's adoption.
We examine the causal effect of arranged marriage on domestic violence (DV) against women in China. Using data from the second wave of the Chinese Women’s Social Status Survey (2000), we document a significant positive association between arranged marriage and women’s exposure to DV. To address potential endogeneity, we exploit the regional prevalence of arranged marriages among older cohorts as an instrumental variable (IV). The IV estimates confirm a causal link between arranged marriages and DV. Our findings remain robust to the inclusion of additional controls, alternative samples and outcome measures, and bounding tests. Mechanism analysis suggests that arranged marriages may induce violence by eroding women’s intra-household bargaining power, reinforcing traditional gender norms, and impairing marital communication quality. Furthermore, we document that arranged marriage is positively associated with men’s DV victimization as well. Nevertheless, parents may derive substantial benefits from this marital institution, including reduced financial burdens, ensured patrilineal continuity, and greater access to old-age support from their children.
The Political Legislation Cycles theory predicts peaks of legislative production before elections, as incumbents adopt vote-maximizing strategies to secure reelection. Like for budget cycles, legislative cycles can be interpreted as quantitative evidence of a dynamic inefficiency in the agency relationship between voters and politicians. This paper presents the first panel test of PLC theory, to identify which institutional features generate this inefficiency, exploiting a newly assembled dataset of the legislative activity of twenty electoral democracies, mainly from 1975 to 2010s. The estimates show that the total number of laws decreases at the beginning of a legislature and significantly increases near its end, generally 6 months before, with magnitudes of the cycles varying across countries. These cross-countries variations appear correlated with electoral systems (PR electoral systems generating cycles 67% greater than majoritarian), government systems, with presidential democracies being characterized by larger cycles especially when governments are divided, and with the degree of fiscal decentralization, with highly decentralized countries showing a legislative cycles 64% greater. Finally, the level of democracy affects PLC in a nonlinear way. These results provide a quantitative guidance to constitutional reforms aimed at increasing efficiency in the representation of voters’ preferences in democracies
