Volume 8 (2012)
Volume 7 (2011)
Volume 6 (2010)
Volume 5 (2009)
Volume 4 (2008)
Volume 3 (2007)
Volume 2 (2006)
Most Downloaded Articles
- Federalism, Budget Deficits and Public Debt: On the Reform of Germany's Fiscal Constitution by Feld, Lars P. and Baskaran, Thushyanthan
- On the Behavioral Economics of Crime by van Winden, Frans A.A.M. and Ash, Elliott
- Judicial Review in China: A Positive Political Economy Analysis by Ip, Eric C.
- The Costs and Benefits of Secured Creditor Control in Bankruptcy: Evidence from the UK by Armour, John/ Hsu, Audrey Wen-hsin and Walters, Adrian
- A Framework for the Analysis of Market Manipulation by Ledgerwood, Shaun D. and Carpenter, Paul R.
The Multiplier Effect of Public Expenditure on Justice: The Case of Rental Litigation
1Ermes, CNRS and University of Paris II Pantheon-Assas
1EconomiX, CNRS and University of Paris Ouest Nanterre-La Defense
Citation Information: Review of Law & Economics. Volume 7, Issue 1, Pages 243–263, ISSN (Online) 1555-5879, DOI: 10.2202/1555-5879.1465, August 2011
- Published Online:
When courts are congested, the risk associated with facing a defaulting tenant is high for landlords. They tend to compensate for this risk by increasing rents to include a “risk premium.” This has the effect of making the probability of defaulting increase, as well as further overloading the courts. Using a simple model we show in this paper how a better equilibrium can be reached when the resources of the judiciary are slightly increased. Our explanation is that a rise in public legal resources not only allows courts to produce more decisions (direct effect), but also reduces the number of cases coming in by giving landlords an incentive to charge lower rents (indirect effect). The synergy of the two effects creates a multiplier of public expenditure on justice.