To tackle court backlogs, policy makers in many countries have been pursuing legal and judicial reforms in order to improve timeliness and to reduce the demand for litigation. Yet, Priest’s congestion equilibrium theory states that reforms aimed at reducing court delay are offset in the long run by an increased tendency to litigate.
This paper is the first to empirically investigate the relationship between litigation rates and court backlogs (measured by pending cases per judge) across countries using the new method of unconditional quantile regression (UQR). To test the induced litigation hypothesis, we compiled a biennial panel dataset for 37 European countries over the period 2006-2012, which reveals that cross-country differences in litigation rates are substantial.
In accordance with the hypothesis, we find a significant negative impact of backlogs on litigation rates in highly litigious countries, insofar as the latter experience a high degree of judicial independence. However, we find a counterintuitive positive impact in lightly litigious countries, which can be explained by the decrease of the predictability of verdicts, resulting in relative optimism of parties that offsets the time effect.International Review of Law and Economics (accepted)