Using firm-level data from 28 developing and transition countries, we investigate how judicial quality affects firm exports through relationship-specific investment. We find that a good legal system significantly increases exports among firms that use more customized goods as intermediate inputs. We control for potential reverse causality using propensity score matching. Our main results are robust to the use of different econometric methods.
Bibliographical noteWe would like to thank the editor, Dan Berkowitz, two anonymous referees and Kenneth Chan for their useful suggestions that substantially improved the paper. This Project was partially sponsored by a Competitive Earmarked Research Grant (LU3409/06H) from the Research Grants Council of the HKSAR Government and a Direct Allocation Grant from Lingnan University (Funding # DR07B4). The usual disclaimer applies.
- Contract intensity
- International trade