Judicial system performance and economic development

Abstract

The role of judicial systems in determining economic performance has gained increasingly attention in recent years. Nonetheless, the literature lacks a clearly articulated framework to examine how judicial systems influence the investment and production decisions of economic agents. This paper tries to fill in this gap. It examines what constitutes a well-functioning judiciary, analyzes how dysfunctional judicial systems compromise economic growth, and reviews the relevant empirical literature. It concludes with some remarks about why, despite the widespread perception that well-functioning legal and judicial systems are key to the success of market-oriented reforms in developing and transition countries, judicial reform has lagged so much behind other reforms.