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Bankruptcy Law and Entrepreneurship

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Author Info
John Armour
Douglas Cumming

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Abstract

Recent initiatives in a number of countries have sought to promote entrepreneurship through relaxing the legal consequences of personal bankruptcy. Whilst there is an intuitive link, relatively little attention has been paid to the question empirically, particularly in the international context. We investigate the relationship between bankruptcy laws and entrepreneurship using data on self-employment over 16 years (1990--2005) and fifteen countries in Europe and North America. We compile new indices reflecting how "forgiving" personal bankruptcy laws are. These measures vary over time and across the countries studied. We show that bankruptcy law has a statistically and economically significant effect on self-employment rates when controlling for GDP growth, MSCI stock returns, and a variety of other legal and economic factors. Copyright 2008, Oxford University Press.

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File URL: http://hdl.handle.net/10.1093/aler/ahn008
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Publisher Info
Article provided by Oxford University Press in its journal American Law and Economics Review.

Volume (Year): 10 (2008)
Issue (Month): 2 ()
Pages: 303-350
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:oup:amlawe:v:10:y:2008:i:2:p:303-350

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Postal: Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK
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Web page: http://www.aler.oupjournals.org/

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  2. Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-95, December. [Downloadable!] (restricted)
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  3. repec:fth:prinin:319 is not listed on IDEAS
  4. Josh Lerner, 2002. "Patent Protection and Innovation Over 150 Years," NBER Working Papers 8977, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Giannetti, Mariassunta & Simonov, Andrei, 2003. "Does Prestige Matter More than Profits? Evidence from Entrepreneurial Choice," CEPR Discussion Papers 4157, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  6. Edward P. Lazear, 2002. "Entrepreneurship," NBER Working Papers 9109, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Wagner, Joachim & Sternberg, Rolf, 2002. "Personal and Regional Determinants of Entrepreneurial Activities: Empirical Evidence from the REM Germany," IZA Discussion Papers 624, Institute for the Study of Labor (IZA). [Downloadable!]
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  12. Douglas Holtz-Eakin & David Joulfaian & Harvey Rosen, 1993. "Sticking It Out: Entrepreneurial Survival and Liquidity Constraints," Working Papers 698, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
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  13. André van Stel, 2003. "COMPENDIA 2000.2: a harmonized data set of business ownership rates in 23 OECD countries," Scales Research Reports H200302, EIM Business and Policy Research. [Downloadable!]
  14. André van Stel & Roy Thurik & Sander Wennekers & Niels Noorderhaven, 2003. "Self-employment across 15 European countries: the role of dissatisfaction," Scales Research Reports N200223, EIM Business and Policy Research. [Downloadable!]
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  17. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December. [Downloadable!] (restricted)
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  18. David Blanchflower & Andrew J. Oswald, 1990. "What Makes an Entrepreneur? Evidence on Inheritance and Capital Constraints," NBER Working Papers 3252, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  19. Fan, Wei & White, Michelle J, 2003. "Personal Bankruptcy and the Level of Entrepreneurial Activity," Journal of Law & Economics, University of Chicago Press, vol. 46(2), pages 543-67, October.
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  21. James M. Poterba, 1989. "Venture Capital and Capital Gains Taxation," NBER Working Papers 2832, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  22. Uschi Backes-Gellner & Arndt Werner, 2003. "Entrepreneurial Signaling: Success Factors for Innovative Start-Ups," Working Papers 0055, University of Zurich, Institute for Strategy and Business Economics (ISU), revised Mar 2004. [Downloadable!]
  23. Wagner, Joachim, 2004. "Nascent Entrepreneurs," IZA Discussion Papers 1293, Institute for the Study of Labor (IZA). [Downloadable!]
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Stel, A.J. van & Storey, D. & Thurik, A.R., 2006. "The Effect of Business Regulations on Nascent and Young Business Entrepreneurship," Research Paper ERS-2006-052-ORG Revision, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni. [Downloadable!]
    Other versions:
  2. Robin Mason & Helen Weeds, 2007. "Merger Policy, Entry, and Entrepreneurship," Economics Discussion Papers 634, University of Essex, Department of Economics. [Downloadable!]
  3. John Armour, 2006. "Legal capital: an outdated concept," ESRC Centre for Business Research - Working Papers wp320, ESRC Centre for Business Research. [Downloadable!]
  4. Arup Daripa & Simone Varotto, 2005. "Ex Ante Versus Ex Post Regulation of Bank Capital," Birkbeck Working Papers in Economics and Finance 0518, Birkbeck, Department of Economics, Mathematics & Statistics. [Downloadable!]
    Other versions:
  5. Césaire A. Meh & Yaz Terajima, 2008. "Unsecured Debt, Consumer Bankruptcy, and Small Business," Working Papers 08-5, Bank of Canada. [Downloadable!]
  6. Brendan Burchell & Alan Hughes, 2006. "The stigma of failure: An international comparison of failure tolerance and second chancing," ESRC Centre for Business Research - Working Papers wp334, ESRC Centre for Business Research. [Downloadable!]
  7. Michelle J. White, 2008. "Bankruptcy: Past Puzzles, Recent Reforms, and the Mortgage Crisis," NBER Working Papers 14549, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Adam B. Ashcraft & Astrid A. Dick & Donald P. Morgan, 2007. "The Bankruptcy Abuse Prevention and Consumer Protection Act: means-testing or mean spirited?," Staff Reports 279, Federal Reserve Bank of New York. [Downloadable!]
  9. Peter Egger & Christian Keuschnigg & Hannes Winner, 2009. "Incorporation and Taxation: Theory and Firm-level Evidence," Working Papers 0908, Oxford University Centre for Business Taxation. [Downloadable!]
    Other versions:
  10. Chad Moutray, 2008. "Educational Attainment and Other Characteristics of the Self-Employed: An Examination using Data from the Panel Study of Income Dynamics," The Office of Advocacy Small Business Working Papers 07cm, U.S. Small Business Administration, Office of Advocacy. [Downloadable!]
  11. Andre van Stel & David Storey & Roy Thurik, 2006. "The effect of business regulations on nascent and actual entrepreneurship," Papers on Entrepreneurship, Growth and Public Policy 2006-04, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group. [Downloadable!]
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This page was last updated on 2009-11-19.

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