A Political Economy Approach
New Horizons in Law and Economics series
Edited by Alain Marciano and Jean-Michel Josselin
Chapter 8: Judicial independence as a necessary component of the rule of law: preliminary insights and economic consequences
Stefan Voigt* 1 INTRODUCTION In recent years, it has become almost commonplace to turn to institutional variables for explaining diﬀerential growth rates. The ensuing debate on ‘good governance’ focuses primarily on institutional factors among which the ‘rule of law’ occupies a prominent place. In this debate, judicial independence (JI) has always fared prominently. If the judiciary is independent from pressures by the other government branches, this will make the promises of the other branches – for example, with regard to the protection of property rights – more credible. In the long run, even the other branches which are constrained by an independent judiciary will be better oﬀ: if promises are attributed higher credibility, this will lead to additional investment which will, in turn, lead not only to higher income and growth but also to higher tax receipts of the state. Yet, an independent judiciary that constrains government action can be costly in the short run and there is always the danger that factual independence is lower than the degree of independence found in legal documents. In this chapter, one indicator for measuring formal as well as factual JI is introduced. There have been some attempts to estimate the degree to which the rule of law is realized in diﬀerent countries. The data published by the International Country Risk Guide (ICRG; see, for example, Knack and Keefer 1995) is one such example. These are data used by foreign investors in order to assess country-speciﬁc risks. Use of these data has...
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