How economic downturns affect legal markets

Abstract

ABSTRACT Periods of economic downturn are of keen interest to the law. The legal literature primarily focuses on how laws and legal markets affect – by contributing to or abating – economic downturns. This focus has left a sizeable gap in the literature analyzing the converse: how economic downturns affect law practice. The conventional wisdom is that economic downturns harm legal markets overall, and transaction practices in particular, but supporting data are not well studied. This paper helps fill the empirical gap by surveying and interviewing Bay Area attorneys from various law firms on their perception of the effects of economic downturns on legal markets. We find evidence to support the conventional wisdom at a high level of generality, but the granularity of our data lead to findings that significantly complicate the general picture. We find, for example, that personal-injury litigation is negatively affected by economic downturns, investment-management law is resilient, and healthcare transactional work can be positively affected. Our study reveals a highly complex picture of the effects of economic downturns on legal markets, effects that are dependent upon a constellation of factors. Overall, our study offers a more nuanced understanding of economic downturns and the legal profession.