Economic performance, creditor protection, and labour inflexibility

Felipe Balmaceda () and Ronald Fischer

Oxford Economic Papers, 2010, vol. 62, issue 3, 553-577

Abstract: We present a static general equilibrium model of an open economy where agents are heterogeneous in terms of observable wealth and there are endogenous credit constraints due to imperfect creditor protection. Improved credit protection, harder assets, and more efficient bankruptcy procedures increase output, investment, and credit penetration. Better credit protection and harder assets lead to higher interest rate spreads. In a capital constrained (unconstrained) economy, greater (lower) wealth inequality leads to higher (lower) investment and output. Interest rate spreads are lower in richer and more unequal economies in terms of their wealth distribution. We also show that increased labour protection leads to lower wages and output in the presence of credit market imperfections. Nevertheless, increased protection benefits workers in (and owners of) firms with strong balance sheets. Copyright 2010 Oxford University Press 2009 All rights reserved, Oxford University Press.

Date: 2010
References: Add references at CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
http://hdl.handle.net/10.1093/oep/gpp033 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Economic Performance, creditor protection and labor inflexibility (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:oxecpp:v:62:y:2010:i:3:p:553-577

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

Oxford Economic Papers is currently edited by James Forder and Francis J. Teal

More articles in Oxford Economic Papers from Oxford University Press Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK.
Bibliographic data for series maintained by Oxford University Press ().