Judicial Quality and the Credit Market: The Case of Spanish Mortgages

Fernando Gomez (Pompeu Fabra Barcelona)
Virgina Rosales (University of Granada)
Adrian Segura (Pompeu Fabra Barcelona)
Rok Spruk (University of Ljubljana)


We study the impact of the quality of the Spanish judicial system on access for mortgage credit (its volume and capitalization). Following Posner (2000) we proxy the quality of judicial decisions by the proportion of judgements and orders by trial courts in civil matters that are reversed by appellate courts for a sample of 50 provinces during the 2007-2019 period. Our estimates show that for a 1 percentage point increase in the revocation rate there is a drop of 0.35 percentage points in the size of the mortgage market. Our specification is robust to time and province fixed effects. This relationship still holds if we add as a control a measure of the efficiency or expediency of the court system (measured by the congestion rate at trial courts in civil matters) what leads us to conclude that the quality of the judicial system matters itself regardless of how clogged or expeditious the judicial system is.

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