Making Local Courts Work: The Judicial Recentralization Reform and Local Protectionism in China

Abstract

Despite extensive comparative research on the relationship between government and courts, the independence and administration of local judiciaries remain understudied. Is a decentralized system—where local governments appoint judges and finance court budgets—more conducive to court autonomy than a centralized system that allows higher-level governments to control local judiciaries? We examine a reform in China that gradually recentralizes control over local courts. Using a difference-in-differences design with a unique dataset of lawsuits from listed firms (2012–2018), we find that recentralization diminishes local officials’ ability to interfere with court decision-making and reduces advantages for local litigants. These results suggest that recentralization can help insulate courts from government influence and enhance judicial independence under certain conditions.