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The Law and Economics of Lawyers: Evidence from the Revolving Door in China's Judicial System

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This paper examines how power lawyers shape judicial and economic outcomes by studying the “revolving door” between judges and lawyers in China’s judicial system—namely, former judges who quit the bench to practice law. In otherwise identical lawsuits, revolving-door lawyers deliver 8−23% higher win rate for their clients. Their performance in home versus away courts suggests these gains stem from both “know how” and “know who.” We extend the theoretical framework of Dewatripont and Tirole (1999) to show that revolving-door lawyers create countervailing forces in society: they enhance judicial decision-making through evidence and reasoning, but also exploit strategic arguments and connections to bias outcomes in favor of their clients. We estimate a structural model of the judicial process to quantify these trade-offs and find that increasing the supply of power lawyers can have a non-monotonic effect on equilibrium judicial quality.

Journal Publisher
NBER Working Paper
Authors
Shaoda Wang

Chenggang Xu

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Senior Research Scholar, Stanford Center on China's Economy and Institutions
chenggang_xu.jpeg PhD

Chenggang Xu is a Senior Research Scholar at the Stanford Center on China's Economic and Institutions, and a Visiting Fellow at the Hoover Institution at Stanford University, and a Visiting Professor, Department of Finance, Imperial College London.

Chenggang received his PhD in Economics from Harvard University in 1991. He previously taught at the University of Hong Kong as Chung Hon-Dak Professor of Economics, at Tsinghua University as Special-term Professor of Economics, at Seoul National University as World-Class University Professor of Economics, and at LSE as Reader of Economics. He was the President of the Asian Law and Economics Association.  He was a first recipient of China Economics Prize (2016) and a recipient of the Sun Yefang Economics Prize (2013). 

Chenggang's research is in political economics, institutional economics, law and economics, development economics, transition economics and the Chinese political economy. His research and opinions have been covered widely in the Greater China area and in the world. He is currently a board member of the Ronald Coase Institute (RCI) and a research fellow of the CEPR.

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