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Role of Courts in Economic Development: A Case of Prewar Japan

Author(s): 
Masaki Nakabayashi and Tetsuji Okazaki
日付: 
Sat, 2007-09-01
Abstract: 

In this paper, we explore the role of courts in the Japanese economic development, using prefecture-level litigation statistics. Since the late nineteenth century, the Japanese people brought many cases before the courts. The dominant part of the cases dealt with monetary issues, which implies that the court played a substantial role in arbitrating disputes related to economic transactions. Through regression analyses of prefecture-level panel data, it was found that frequency of law suits was positively correlated with the scale of economic activities, but that it was only in case economic development was accompanied by urbanization or decline of local communities. At the same time, it is found that increase of the capacity of the legal system enhanced financial development. In this case also, the importance of the capacity of legal system was conditional on the function of local communities.

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