Macroeconomic Development and Civil Litigation

This paper contributes to the explanation of the tremendous rise in civil litigation activity in Austria over the last four decades by analysing the influence of macroeconomic conditions on civil litigation. We find that the number of transactions per individual—proxied by the level of real per capita GDP—positively influences the amount of litigation per capita. Inertia in litigious behavior reinforces effects. In the short run, however, we observe a countercyclical pattern of litigious activity. Cointegration analysis confirms the short run negative association, and a long run cointegrating relationship between GDP and civil litigation. Several robustness tests corroborate our results. Rent-seeking interpretations, and possible detrimental effects on the long run growth prospects cannot be excluded.