Macroeconomic implications of insolvency regimes
Benjamin Hemingway ()
No 77, Bank of Lithuania Working Paper Series from Bank of Lithuania
The impact of creditor and debtor rights following firm insolvency are studied in a firm dynamics model where defaulting firms choose between restructuring or exit. The model accounts for differing effects of productivity shocks across economies that differ in the credit/debtor rights. Following a negative shock labour productivity falls sharply in a creditor-friendly regime such as the UK while in a debtor-friendly regime such as the US, there is a larger employment response. This paper suggests a possible explanation for the different employment and labour productivity response in the UK and US since the financial crisis.
Keywords: Bankruptcy; Insolvency; Firm Financing (search for similar items in EconPapers)
JEL-codes: D21 E22 G33 (search for similar items in EconPapers)
Pages: 42 pages
New Economics Papers: this item is included in nep-cfn, nep-dge, nep-ent, nep-fdg, nep-mac and nep-ore
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Persistent link: https://EconPapers.repec.org/RePEc:lie:wpaper:77
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