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

Abstract

This paper studies the roles of lawyers in shaping judicial and economic outcomes, exploiting the unique setting of “revolving-door” lawyers in China’s judicial system. By compiling a comprehensive dataset covering the universes of judges, lawyers, law firms, litigants, and lawsuits in China from 2014 to 2021, we identify over 14,000 judges who left their positions to practice as lawyers, accounting for 6.6% (2.6%) of all judges (lawyers) nationwide. We report three main findings. First, in otherwise identical lawsuits, these revolving-door lawyers obtain significantly more favorable court decisions for their clients. Second, leveraging within-lawyer variation in performance at home vs. away courts, we show that the advantage of revolving-door lawyers comes from both “know who” and “know-how.” Third, revolving-door lawyers create countervailing forces in society --- on the one hand, they present evidence and reasoning to help judges make more informed decisions; on the other hand, they use connections and strategic arguments to help their (affluent) clients, thereby biasing judicial decisions and exacerbating socio-economic inequalities. We extend the theoretical framework of Dewatripont and Tirole (1999) to quantify these trade-offs.