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Business Conditions and Default Risks across Countries

Michael P. Pflüger () and Stephan Russek ()
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Michael P. Pflüger: University of Würzburg
Stephan Russek: University of Passau

No 5541, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: The risk of default that business firms face is very significant and differs widely across countries. This paper explores the links between countries' business conditions and international trade embedment and the default risk at the country level from a theoretical point of view. Our main contribution is to set up a general equilibrium model which allows us to derive sharp predictions concerning how key factors which shape a country's business and trade environment impact on the default risk of firms which operate in these environments. The predictions are in accord with readily available data.

Keywords: trade integration; firm death; business conditions and firm productivity; firm heterogeneity (search for similar items in EconPapers)
JEL-codes: F12 F13 F15 L25 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2011-02
New Economics Papers: this item is included in nep-ban, nep-bec, nep-int, nep-opm and nep-rmg
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Citations: View citations in EconPapers (9)

Published - published in revised form in: Open Economies Review, 2013, 24 (5), 963-976

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