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

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.