Congestion in the Justice System and Private Investments
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Date
2018
Authors
Marang’a, Moses
Ouma, Duncan
Kosimbei, George
Journal Title
Journal ISSN
Volume Title
Publisher
IPRJB
Abstract
Purpose: Public goods and services play a vital role in a given economy. Most importantly,
optimal supply of public goods and services is desirable. The justice system services are public
services that, as argued by most economists and governments, would be expected to spur the
growth of private investment. However, these services are prone to congestion which may
influence their supply and level of use. This study investigated the effect of congestion in the
justice system on private investments growth in Kenya.
Methodology: Drawing from the modified neoclassical theory of investment, a government
service characterized by congestion was integrated as an input in the firm’s production function
to derive a structural model for private investment growth. Utilizing data for the period 1960 to
2016, two-stage least square (2SLS) instrumental variable (IV) method was used for estimation.
Results: The study found that congestion in the justice system reduces growth of private
investment. This implies that congestion increases firm’s adjustment costs, decrease their
profitability and consequently reduces capital accumulation.
Recommendation: To enhance the growth of private investments, we recommend reduction of
congestion in the justice system to the possible minimum. This can be achieved by upscaling
resolution of disputes out of court to reduce inflow of new caseload. Consequently, the waiting
period between hearings and mentions for existing cases would reduce translating to speedy
conclusion of cases. The justice system institutions with involvement of litigants and their legal
representatives should continuously undertake activities targeting rapid finalization of old cases,
but not at the expense of inbound demand for justice. Consequently, congestion would diminish
creating a legal and contracting environment characterized by minimal delay hence supporting
accumulation of capital.
Description
A Research Article in the Journal of Poverty, Investment and Development
Keywords
Congestion, Private investments.
Citation
Marang'a, M., Ouma, D., & Kosimbei, G. (2018). Congestion in the Justice System and Private Investments. Marang’a MW, Ouma, D., & Kosimbei, G.(2018). Congestion in the justice system and private investments. Journal of Poverty, Investment and Development, 1(1), 1-19.