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Advocatus, et non Latro? Testing the Supplier-Induced Demand Hypothesis for the Italian Courts of Justice

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  • Paolo Buonanno
  • Matteo M. Galizzi
Abstract
We explore the causality relationship between litigation rates and the number of lawyers, drawing on an original panel dataset for the 169 Italian first instance courts of justice between 2000 and 2007. In this time bracket, both the number of lawyers and the civil litigation rate sharply increased, and a mandatory minimum fee was in place for lawyers services. We first document that the number of lawyers is positively correlated with different measures of litigation rate. Then, using an instrumental variables strategy, we find that a 10 percent increase of lawyers over population is associated with an increase between 1.6 and 6 percent in civil litigation rates. Our empirical analysis supports the supplier-induced demand (SID) hypothesis for the Italian lawyers: following the sharp increase in the number of lawyers, and in the impossibility of competing in price because of the minimum fee regulation, some lawyers could have opportunistically used their in- formational advantage to induce their clients to bring lawsuits into court more often than it would be optimal if they were acting in the exclusive interest of the clients.

Suggested Citation

  • Paolo Buonanno & Matteo M. Galizzi, 2012. "Advocatus, et non Latro? Testing the Supplier-Induced Demand Hypothesis for the Italian Courts of Justice," Carlo Alberto Notebooks 250, Collegio Carlo Alberto.
    • Handle: RePEc:cca:wpaper:250
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    Citations

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    Cited by:

    1. Lara Wemans & Manuel Coutinho Pereira, 2015. "Determinants of civil litigation in Portugal," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    2. Juan S. Mora-Sanguinetti & Nuno Garoupa, 2015. "Litigation in Spain 2001-2010: Exploring the market for legar services," Working Papers 1505, Banco de España.
    3. Juan S. Mora-Sanguinetti & Marta Martínez-Matute, 2019. "An economic analysis of court fees: evidence from the Spanish civil jurisdiction," European Journal of Law and Economics, Springer, vol. 47(3), pages 321-359, June.
    4. Buonanno Paolo & Galizzi Matteo M., 2014. "Advocatus, et non Latro? Testing the Excess of Litigation in the Italian Courts of Justice," Review of Law & Economics, De Gruyter, vol. 10(3), pages 285-322, November.
    5. Massenot Baptiste, 2010. "Contract Enforcement, Litigation, and Economic Development," Cahiers de Recherches Economiques du Département d'économie 10.14, Université de Lausanne, Faculté des HEC, Département d’économie.
    6. Bisin, A. & Geanakoplos, J.D. & Gottardi, P. & Minelli, E. & Polemarchakis, H., 2011. "Markets and contracts," Journal of Mathematical Economics, Elsevier, vol. 47(3), pages 279-288.
    7. Massimo Finocchiaro Castro & Calogero Guccio, 2014. "Searching for the source of technical inefficiency in Italian judicial districts: an empirical investigation," European Journal of Law and Economics, Springer, vol. 38(3), pages 369-391, December.
    8. Martin Meier & Enrico Minelli & Herakles Polemarchakis, 2014. "Competitive markets with private information on both sides," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 55(2), pages 257-280, February.
    9. Doménech-Pascual, Gabriel & Martínez-Matute, Marta & Mora-Sanguinetti, Juan S., 2021. "Do fee-shifting rules affect plaintiffs’ win rates? A theoretical and empirical analysis," International Review of Law and Economics, Elsevier, vol. 65(C).
    10. Monica Billio & Roberto Casarin, 2010. "Bayesian Estimation of Stochastic-Transition Markov-Switching Models for Business Cycle Analysis," Working Papers 1002, University of Brescia, Department of Economics.
    11. Roberto Ippoliti, 2014. "La competitivit? del mercato forense e l?efficienza giudiziaria," ECONOMIA PUBBLICA, FrancoAngeli Editore, vol. 2014(2), pages 53-90.
    12. Rizos, Anastasios & Kapopoulos, Panayotis, 2021. "Judicial Efficiency and Economic Growth: Evidence based on EU data," MPRA Paper 107861, University Library of Munich, Germany.

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    More about this item

    Keywords

    laywers; litigation rates; credence goods;
    All these keywords.

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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