The key requirement for economic prosperity is the rule of law. In turn, a critical component of the rule of law is an effective judicial system, which is also responsible for the enforcement of contracts and for settling disputes in the presence of unexpected contingencies.
Roberto Ippoliti and Giovanni Ramello analyse the Italian judiciary by engaging in an empirical investigation of the activity of the courts of first instance within the realm of taxation. In particular, this paper studies the performance of Italy’s tax judiciary and the incentives that characterise the judges’ activity. Typical of the Italian system is the fact that judges are appointed for limited periods of time, work part-time for the courts, and are allowed to continue their private practice as professional lawyers. This feature enables the authors to assess the opportunity costs of the appointed judges and, therefore, their commitment to operate in courts as tax judges.
The paper considers the production of judicial services as a standard production process. Consistent with the literature, the output variable is the number of cases solved; while the number of judges, the time it takes to move the relevant files through the bureaucratic system, and the number of cases pending (the backlog) are identified as the critical inputs. With regard to the Italian context, the courts in Umbria and in the Bolzano province obtain the highest efficiency scores, while Marche and the Trento province are the worst performers. Delays are shorter in Umbria and Valle d’Aosta, and longer in Calabria, Puglia and Sicily.
This article shows that the backlog is indeed one of the determinants of judicial delay, and that delays can be cut by increasing the number of the courts and also by increasing the working load assigned to each judge. In particular, the data reveal that the key element is the judges’ efforts, and that judges are highly responsive to monetary incentives. In other words, productivity within the courts increases as the opportunities to make money outside the courts decrease. Hence, if the policy maker aims at increasing the productivity of the tax judiciary and reducing delays, raising the judges’ salaries and possibly linking their remuneration to their individual performance may be more important than hiring a greater number of officials. Moreover, it is shown that judicial efficiency also depends on the quality of the procedures: reducing delay at each step of the judicial procedure can be counterproductive. Within this framework, it is suggested that more time should be devoted to preliminary screening, since this would drastically reduce delays at later stages.
IREF Working Paper No. 201604: Roberto Ippoliti und Giovanni B. Ramello