Access to justice and entrepreneurship: evidence from Brazil's special civil tribunals

Abstract

Entrepreneurship is usually identified as an important determinant of aggregate productivity and long-term growth. The determinants of entrepreneurship, nevertheless, are not entirely understood. A recent literature has linked entrepreneurship to the development of the justice system. This paper contributes to this literature by evaluating the role of access to justice in determining the incidence of entrepreneurship. We explore the creation of special civil tribunals in the Brazilian state of Sao Paulo during the 1990s. Special civil tribunals increased the geographic presence of the justice system, simplified judicial procedures, and increased the speed of adjudication of disputes. Using census data and an instrumental variables strategy, we find that implementation of special civil tribunals led to increased entrepreneurship among individuals with higher levels of education. Results do not seem to be related either to other changes in public goods provision at the local level or to preexisting trends.