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Bankruptcy and Voluntary Liquidation: Evidence for New Firms in East and West Germany after Unification

  • Prantl, Susanne
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    Exploiting the unique economic situation after German unification, I investigate how exit decisions deviate between new firms in a transition and a comparatively stable market environment. Two competing exit mechanisms are considered: entrepreneurial self-selection via voluntary liquidation and external selection based on insolvency regulation. Distinguishing between the competing exit modes proves to be crucial in semi-parametric propor- tional hazard-rate estimations. Comparing East and West Germany, I find distinct education and size effects and a higher share of bankruptcy-related liquidations in East Germany. These results are argued to reflect different industry structures, capital and labor market conditions in both parts of Germany.

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    Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 03-72.

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    Date of creation: 2003
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    Handle: RePEc:zbw:zewdip:1682
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