Is Judicial Inefficiency Increasing the House Property Market Weight in Spain? Evidence at the Local Level

Abstract

Compared with the rest of the European countries the weight of the house property market in Spain is very high, which is consistent with the weakness of the tenancy market. In this context, it has often been argued that an inefficient judicial system, implying a cumbersome procedure to evict a non-paying tenant or simply needing a long period to execute a decision, may be an important determinant of the tenancy market weakness, as it constrains the effective supply by reducing the profitability of landlords. This research has studied this effect econometrically using a panel data approach and exploiting the differences in the judicial efficiency that exists among the Spanish provinces. After controlling for several other factors, this study concludes that the degree of inefficiency of the judicial system has a positive, although minor, impact on the differences in the property share among provinces in Spain.