Search

The authors show that judicial independence can reduce local protectionism and foster cross-regional economic integration. The authors exploit a judicial independence reform in China with staggered roll-out since 2014. The reform removed local governments’ control over local courts’ financial and personnel decisions, thereby substantially improving local courts’ independence. Combining novel data on the universes of civil lawsuits and business registration records, the authors show that local defendants’ rate of winning court cases against non-local plaintiffs declined by 7.0% after the reform. The effect is mainly driven by improvements in the quality of judicial decisions and is more salient for politically connected local defendants. Over time, the reduction in local protectionism encouraged smaller non-local firms to file lawsuits against larger local firms. Using the shareholding network extracted from business registration records, the authors find that the decline in local protectionism could attract 8.4% more inward investment flows into reformed localities. This has the potential to increase China’s GDP by 1.9% when the judicial independence reform is implemented nationwide.

Sentencing disparity is an underexplored issue in civil law countries and developing countries. Using rich data from 3 million court verdicts in China, we show that criminals from the minorities on average receive sentences that are 3.1 percent longer than those of comparable Han criminals. The disparity is estimated within narrowly defined crime cells and is robust to the inclusion of a rich set of control variables. We also find that the ethnic disparity is greater in western provinces, in regions with lower GDP per capita, and in provinces with larger minority population. Certain minority groups face larger sentence penalty than others. Greater ethnic disparities are observed in more severe crimes. We then investigate how China’s recent sentence guideline reform affects the observed ethnic disparity. Using a difference-of-differences model, we find that the reform effectively eliminates the sentence disparity between Han and minorities. A back of envelope calculation indicates that the reform leads to an annual income gain of more than 62 million dollars for criminals of minorities. Keywords: ethnicity disparity, criminal sentence, sentencing guideline reform