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Bankruptcy Shocks and Legal Labor Markets: Evidence from the Court Competition Era

Chad Brown, Jeronimo Carballo and Alessandro Peri

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Abstract: We study how Chapter 11 bankruptcies affect local legal labor markets. We document that bankruptcy shocks increase county legal employment and corroborate this finding by exploiting a stipulation of the law known as Forum Shopping during the Court Competition Era (1991-1996). We quantify losses to local communities from firms forum shopping away from their local area as follows. First, we calculate the unrealized potential employment gains implied by our reduced-form results. Second, we structurally estimate a model of legal labor markets and quantify welfare losses. We uncover meaningful costs to local communities from lax bankruptcy venue laws.

Date: 2022-01
New Economics Papers: this item is included in nep-law
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