Staging Institutional Reform Across Space: Court Modernisation and the Geography of Legal Services in Contemporary China

In the machinery of a modern economy, the courts are the gears that keep commerce turning. When a business signs a contract, it relies on the legal system to enforce that agreement if things go wrong. But just as a road network is not built evenly across a country, the quality of these legal gears varies from place to place. Some cities have courts that are fast, efficient, and easy to use, while others are slow and bogged down by delays. This unevenness matters deeply because businesses and lawyers are mobile; they tend to set up shop where the rules are clear and the disputes are resolved quickly. When a government decides to fix a broken system, it rarely fixes every city at once. Instead, it often chooses a few specific places to test a new approach first, hoping to learn from their success before rolling it out everywhere. This creates a temporary landscape where some cities have a brand-new, high-speed legal system while their neighbors are still waiting for the old, slower version. The question for researchers is not just whether the new system works, but what happens to the places that get it first, and whether those places steal business from the ones that are still waiting.

This paper examines a specific moment in China's legal history to answer that question. In 2020, the Chinese government launched a major reform to speed up civil court cases, a process known as the Civil Procedure Case-Separation Reform. The goal was to sort cases by complexity, using simpler, faster tracks for straightforward disputes and reserving the heavy machinery for complex ones. Before making this change nationwide, the government selected twenty cities to serve as pilots, testing the new rules for two years. These twenty cities were not chosen at random; they were selected because they were already the strongest, most capable legal hubs in the country, with high caseloads and the technology to handle online court hearings. The researchers wanted to know if the reform actually made these cities better, or if they were already improving on their own. More importantly, they wanted to see if the reform caused a "zero-sum" game, where the pilot cities got better by pulling business and talent away from the cities right next door, leaving their neighbors worse off.

To find the answer, the researchers looked at data from 296 cities across China over several years, tracking a "Business Environment Index" that measures how easy it is to do business in a location. This index includes a specific score for the legal environment, which tracks things like how long it takes to resolve a dispute and how reliable the courts are. The first hurdle the team faced was that the pilot cities were already pulling ahead of the rest of the country before the reform even started. Because these cities were chosen for their existing strength, a simple comparison of "before and after" would be misleading; it would look like the reform caused the improvement when the cities were actually on a fast track of their own. To solve this, the researchers used a method called synthetic control. Imagine trying to see if a new fertilizer works on a specific plant that is already growing faster than the others. Instead of just comparing it to a random plant, you create a "synthetic" plant made by mixing together several other plants that grew at the exact same speed as your test plant before the fertilizer was applied. This allows you to see what would have happened to the test plant if it had never received the fertilizer. By building these synthetic versions for the pilot cities, the researchers could strip away the pre-existing advantage and isolate the true effect of the reform.

The results showed that the reform did indeed make a difference, but the benefits were concentrated in specific areas. For the cities where the researchers could build a reliable synthetic match, the legal environment improved significantly after the reform began. This gain was not spread evenly across all aspects of the business climate; it was focused almost entirely on the legal dimension and, to a lesser extent, on innovation. This makes sense, as the reform was specifically designed to make court procedures faster and more efficient. However, the most surprising finding concerned the relationship between the pilot cities and their neighbors. A common fear in regional economics is that if one city gets a major advantage, it will drain resources from the surrounding areas, causing them to decline. The data ruled this out completely. The researchers tested nine different ways of defining "neighbors" and found that the pilot cities never pulled ahead by dragging their neighbors down. In fact, the presence of a pilot city was associated with a positive, or at least neutral, effect on the surrounding areas. The reform created a gap where the pilots got better, but it did not widen that gap by making the neighbors worse.

The study also looked at what happened after the reform was rolled out to the entire country in 2022. Once every city had access to the same faster court procedures, the special advantage the pilot cities held began to shrink. The gap between the pilots and the rest of the country narrowed, suggesting that the extra boost the pilots enjoyed was partly due to being the only ones with access to the new system for a time. This points to a "transitional" inequality: a temporary period where the reform creates a divide between those who have it and those who do not, but not a permanent one where the winners take everything from the losers. The researchers noted that the five strongest pilot cities, including Beijing and Shanghai, were so unique that they could not be matched with a synthetic control, meaning the study could not measure the reform's effect on them with the same precision. However, for the fifteen cities that could be analyzed, the evidence was clear. The reform worked to improve the legal environment in the chosen cities without harming the places next door, creating a temporary period of unequal access that eventually smoothed out as the new rules became national law.

This story of legal reform in China offers a clear lesson about how institutional changes travel across space. When a government tests a new system in a few strong locations, it creates a temporary landscape of inequality where those locations pull ahead. But this does not have to mean that the rest of the country falls behind. The study suggests that the pilots can improve on their own merits without stealing the future from their neighbors. The inequality that arises is a feature of the timing of the rollout, not a zero-sum battle for resources. As the reform spreads to everyone, the temporary advantage fades, leaving a system that is faster and more efficient for all, rather than a landscape where some cities win by making others lose. The research confirms that while the path to a modernized legal system may be uneven at first, the destination can be shared.