An independent judiciary increases economic growth significantly, according to a study recently published by economics professors Lars Feld from the University of Marburg in Germany and his colleague Stefan Voigt from the University of Kassel (also in Germany). This holds, however, only for the factual independence of the judiciary, not for the independence formally granted by the constitution and the laws of a country. The factual independence of the courts is of significant economic relevance: a country that switched from a low degree of factual independence to a high degree could increase its annual growth rate between 1.5 and 2.1 percentage points. This change alone would translate into the doubling of income within a period of 33 to 47 years.
In order to make the economic consequences of the judiciary comparable, the two economists collected data from some 80 countries. They systematically distinguished between formal and factual independence. For their measure of formal independence, they recognized such aspects as the appointment procedure of judges, the length of their tenure in office, accessibility of the court etc. Factual independence is measured by taking into account factual term length, factual salary, the court budget etc. In their study, Feld and Voigt show that the independence of judges can be important for private actors both for their relationship with other private actors as well as for their relationship with the state. Only if the judiciary is truly independent from the other government branches will private actors trust the government. This is a crucial precondition for investment and growth.
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The study – Making Judges Independent – Some Proposals Regarding the Judiciary" can also be downloaded free of charge by clicking here.