The impact of the efficacy of justice on business investment in Spain

Abstract

One of the main determinants of the level of dynamism of business investment is the efficacy of the legal system, as an essential element of the institutional framework of an economy. This article sets out an empirical approach to the impact of the efficacy of justice on the investment decisions of a sample of Spanish firms. Drawing on the cross-provincial heterogeneity in the court congestion rate, and how it changes over time, this analysis suggests there is a positive and significant correlation between efficacy in the civil justice system and business investment in Spain.