Courts, contracts, and international trade: judicial enforcement and global value chain participation

This article examines whether judicial enforcement shapes firms’ participation in global value chains (GVCs). Exploiting Italy’s 2013 court reorganization as a natural experiment, we combine firm-level survey data with administrative records and implement a spatial discontinuity instrumental variable design. We find that longer trials significantly reduce the probability of GVC participation: adding one month of court time lowers participation by 2.3 percentage points, roughly a 10 per cent decline relative to the average participation rate. The effect emerges across different positions in the value chain, is amplified for contractually complex products and sectors, and is consistent with external finance as a key mechanism.