Do enforcement institutions matter for economic specialization? province-level evidence from Spain

Abstract We test whether enforcement institutions shape regional specialization. Using administrative data for all Spanish provinces (NUTS-3) over 1999–2014 with jurisdiction-specific extensions, we measure judicial efficacy by court congestion in administrative and civil courts and identify its causal effect with historical, region-level instruments: foral civil-law stocks and special administrative tax regimes. We find that weaker enforcement shifts specialization away from manufacturing and toward services. In administrative-court specifications, a one standard-deviation increase in congestion rate lowers the manufacturing share by about 12–19% and raisesthe services share by 13–27%. Civil-court effects are smaller but of the same sign. Results are robust to redefining outcomes as complex vs. non-complex activities, aggregating outcomes to NUTS-2, alternative Bartik instrument structures, and identification-robust inference checks. The evidence implies that strengthening judicial enforcement, especially in the administrative jurisdiction, tilts economies toward contract-intensive production and slows premature deindustrialization.