The (in)efficiency of Justice. An equilibrium analysis of supply policies

In this paper we propose an equilibrium computational model of the market for justice that focuses on supply policies aiming to increase the efficiency of the system. We measure performance in terms of completion times and inefficiency in terms of the discrepancy between observed completion time and an efficient benchmark (equilibrium) completion time. By using a rather general production model that can take into account resource use, we can study the (steady state) performance of the justice sector as a whole and improve both on the analysis of length of trials and on standard measures of partial productivity (like the number of defined cases per judge). In order to identify demand and supply and run our counterfactual equilibrium analysis, we focus on a recently collected dataset on the Italian courts of justice system. The Italian case is useful because it provides exogeneous variation in the quantity of interest that allows for identification. It is also interesting because of the heterogeneity of the system in terms of completion times. Overall we find that three supply policies can make a significant contribution to the efficiency of the system: introduction of best practices, break-ups of large courts of justice into smaller ones (to exploit economies of scale), and optimal reallocation of judges across courts (in order to enhance efficiency). We find that, even without introduction of best practices, break- ups and reallocation can reduce the system completion time by around 30%. Although we are critical about the external validity of our results, these results point to the fact that there is large scope for supply policies aiming at improving the processing time of judicial systems.