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Does the Judicial Formalism is Always Harmful?

Ivan César Ribeiro
São Paulo University Law School
April 9th, 2007


Abstract: This paper discusses some of the foundations of the rule of law and due process of law. It makes a counterpoint to the widespread idea that more formalism leads to more corruption and worse institutions (Djankov et al, 2003). Following these authors, de degree of formalism, as measured by an index they propose, vary according to the legal origin, and the higher formalism index results in less impartial, affordable, honest and quick justice.

The paper construct upon this hypothesis, taking into account the proposition that in the presence of great inequality in economic and political resources, the wealthy and the politically powerful will subvert institutions in their own benefit, as proposed by Glaeser, Scheinkman and Shleifer (2003). In such situation the outcome of more formalism will be the opposite of the predicted, and one will face a lesser degree of corruption and better institutions. This concept would be at root of the rules aimed at assuring the due process of law.

Departing from the dataset and models used by Djankov et al, the article tests the interaction between the formalism index Djankov et al propose and an inequality index (GINI), resulting in a significant and positive relation between this interaction the quality of the judicial system. The cross-country analysis made stills for several others formalism, corruption and institutional quality indexes. When controlled for endogeneity the results are not so strong due the use of weak instruments (legal origin), both for the article hypothesis and for the Djankov et al hypothesis. At end, some tests are made trying to separate the elements of formalism that are detrimental to subversion of justice from those that are harmful for justice, as a guidance to policy-makers.

Keywords: Inequality, Growth, Subversion of Institutions, Legal System

JEL Codes: D30, K42, O17, O40, P51

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Research in Focus

Robin Hood Vs. King John Redistribution: How Do Local Judges Decide Cases in Brazil?

Ivan César Ribeiro
São Paulo University Law School
February 4th, 2007

This article discusses two opposed hypotheses to predict the behavior of judges when they have to decide a claim between parties with asymmetrical economic and political power.

The first, which has broad acceptance among policy makers in Brazil, is the jurisdictional uncertainty hypothesis (Arida et al, 2005) that suggests that Brazilian judges tend to favor the weak party in the claim as a form of social justice and redistribution of income in favor of the poor.

Glaeser et al. (2003) stated the second hypothesis. They suggest that the operation of legal, political and regulatory institutions is subverted by the wealthy and politically powerful for their own benefit, a situation they call King John redistribution. An empirical test was conducted analyzing judicial decisions from 16 Brazilian states, showing that

a) judges favor the strongest party,

b) a local powerful party has more chance to be favored than a national or foreign big company, a e¤ect we named parochial subversion of justice and

c) in Brazilian states where we have more social inequality there is higher probability that a discussed contract clause will not be maintained.

Keywords: Inequality, Subversion of Justice, Property Rights.

JEL Codes: D30, K42, O17.

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