A General Equilibrium Analysis of Personal Bankruptcy Law

Lilienfeld‐Toal, Ulf von; Mookherjee, Dilip

doi:10.1111/ecca.12167

Cited by 15 publications

(11 citation statements)

References 48 publications

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“…Above all the following papers, the most relevant to the current paper is [3], which examines a many-to-one two-sided matching model of lenders and borrowers in the context of a principal-agent contracting problem. They use the theoretical model to examine the general equilibrium effects of changes in the limited liability constraint due to new bankruptcy laws.…”

Section: Related Literature and Contributionmentioning

confidence: 99%

“…Additionally, the coexistence of different types of contracts in the same market is widely documented in both the empirical and theoretical literature. However, the paucity of theoretical research examining the coexistence of exclusive and nonexclusive contracts is surprising, with [3] representing the only such work, known to this author, to obtain results on contract coexistence.…”

Section: Introductionmentioning

confidence: 97%

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Matching with Nonexclusive Contracts

Ripperger-Suhler

2024

Games

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A variety of empirical papers document the coexistence of exclusive and nonexclusive contracts within a given market across a multitude of industries. However, the theoretical literature has not been able to generate a differentiable model with the coexistence of these contracts. I rectify the gap in the literature by developing a theoretical model of two-sided matching, in which principals and agents choose between exclusive and nonexclusive contracts with cost-of-effort inefficiencies. I find that the coexistence of contracts relies on cost-sharing between principals, relative bargaining power, and an endogenous outside option. I also find that the pattern of contracts is monotonic with respect to the type distributions of principals and agents.

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Section: Related Literature and Contributionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 97%

Matching with Nonexclusive Contracts

Ripperger-Suhler

2024

Games

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“…They found that filers had more limited access to unsecured credit. Lilienfeld and Toal-Mookherjee [ 24 ] showed in a two-sided matching model that changing exemption levels in bankruptcy law induced a redistribution of credit. A more lenient system resulted in that lending to poorer borrowers shrinks, while for the richest agents grew and the cost of borrowing shrank.…”

Section: Review Of the Literaturementioning

confidence: 99%

How does the leniency of personal bankruptcy law affect entrepreneurship in EU countries?

Walter

Illés²,

Tóth³

2022

PLoS ONE

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Several studies examined how some characteristics of personal bankruptcy laws influenced entrepreneurial developments during the last two decades. Our main objective is to analyze the association between self-employment and the leniency of the personal bankruptcy systems in 24 EU countries. Unlike previous studies, we measure differences and changes in the leniency of the regulations with a composite index that incorporates 35 variables. Based on a cross-country database of self-employment ratios and various control variables spanning the years 2000 to 2019, we apply a panel regression model. We find that the implementation of new regulations and reforms in personal bankruptcy legislation in more lenient directions positively correlates with entrepreneurial developments measured by self-employment rates. This is more significant in the group of countries where the eligibility criteria for entrepreneurs are not constrained. We find a one-year negative time-lag effect and conclude that strong anticipation of the law for a more lenient system can immediately change the risk-reward profile, and thereby influence entrepreneurship before implementing the actual reform. An important policy implication is that a major reform in regulation or the first implementation of conservative legislation has the same order of magnitude of effect on promoting entrepreneurship as other public policy reforms of similar purpose.

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“…One can also analyze situations where it is the agent (subject to moral hazard) who contracts with several principals. One example of such a situation is found in vonLilienfeld-Toal and Mookherjee (2016), who analyze a credit market. This paper also illustrates that an exogenous shock may have a general equilibrium effect in a market contracts which is absent in an isolated principal-agent relationship.…”

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confidence: 99%

Agency theory meets matching theory

Macho‐Stadler

Pérez‐Castrillo

2020

SERIEs

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The theory of incentives and matching theory can complement each other. In particular, matching theory can be a tool for analyzing optimal incentive contracts within a general equilibrium framework. We propose several models that study the endogenous payoffs of principals and agents as a function of the characteristics of all the market participants, as well as the joint attributes of the principal–agent pairs that partner in equilibrium. Moreover, considering each principal–agent relationship as part of a market may strongly influence our assessment of how the characteristics of the principal and the agent affect the optimal incentive contract. Finally, we discuss the effect of the existence of moral hazard on the nature of the matching between principals and agents that we may observe at equilibrium, compared to the matching that would happen if incentive concerns were absent.

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A General Equilibrium Analysis of Personal Bankruptcy Law

Cited by 15 publications

References 48 publications

Matching with Nonexclusive Contracts

Matching with Nonexclusive Contracts

How does the leniency of personal bankruptcy law affect entrepreneurship in EU countries?

Agency theory meets matching theory

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