State Bankruptcy Law and Entrepreneurship: Evidence from a Border Analysis

Shawn Rohlin () and Amanda Ross ()

No 14-12, Working Papers from Department of Economics, West Virginia University

Abstract: This paper examines how differences in state bankruptcy laws, specifically the amount of the homestead exemption, affect business location decisions within a few miles of the state boundary. By focusing on these border areas, we are able to more effectively control for unobserved local attributes and isolate the effect of more wealth protection. We find that an increase in the homestead exemption attracts new businesses. We also find that a more generous homestead exemption has a positive impact on existing businesses, suggesting that asset protection through bankruptcy law encourages successful entrepreneurs to incur the risks. Our results indicate that the wealth protection provided by personal bankruptcy law is an important policy tool that state governments can use to attract new, successful businesses owners.

Keywords: bankruptcy law; entrepreneurship; border methodology (search for similar items in EconPapers)
JEL-codes: K30 K36 R11 R14 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2014
New Economics Papers: this item is included in nep-ent, nep-law and nep-ure
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Related works:
Working Paper: State Bankruptcy Law and Entrepreneurship: Evidence from a Border Analysis (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:wvu:wpaper:14-12

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