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| Tekijä: | Biais, B. Mariotti, T. |
| Otsikko: | Credit, wages, and bankruptcy laws |
| Lehti: | Journal of the European Economic Association
2009 : SEP, VOL. 7:5, p. 939-973 |
| Asiasana: | credit PAY bankruptcy law |
| Kieli: | eng |
| Tiivistelmä: | This article analyzes how bankruptcy laws affect the general equilibrium interactions between credit and wages. It is found that soft laws reduce the frequency of liquidations and thus ex post inefficiencies. On the other hand, they worsen credit rationing ex ante. This makes firm creation more difficult and thus depresses labor demand. Rich agents can invest even if creditor rights are weak. Thus, they favor soft laws that exclude poorer agents from credit market and reduce the competition for labor. By preventing access to credit to some agents, soft laws lower wages, which increases the pledgeable income of richer agents and decreases the liquidation rates they must commit to. Soft laws are Pareto-dominated by tougher laws combined with subsidies to entrepreneurs when they induce strong credit rationing. |
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