Bankruptcy Technology, Finance, and Entrepreneurship

IMF Working Papers, August 10, 2017

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Bankruptcy Technology, Finance, and Entrepreneurship

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Bibliographic details

• Authors: Nelson Sobrinho
• Published: August 10, 2017
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781484314210.001

Summary

• Author: Nelson Sobrinho
• Publication date: August 10, 2017
• Paper type: IMF Working Papers, Working Paper No. 2017/188
• Central finding: Using an overlapping-generations growth model featuring financial intermediation, inefficiencies in bankruptcy technology and obstacles to entrepreneurship have significant negative effects on income per capita and welfare in developing countries.
• Interaction effect: These inefficiencies may interact in perverse ways, further amplifying the negative effects in the long run.
• Policy rationale: Strong rationale for structural reforms that simultaneously speed up resolution of private sector insolvency, improve creditor protection, and eliminate obstacles to entrepreneurship.

Model and approach

• Framework: Overlapping-generations growth model featuring financial intermediation.
• Key mechanisms studied:
  • Inefficiencies in technology to deal with private debt distress (bankruptcy technology).
  • Obstacles to entrepreneurship (high costs of doing business).
• Outcome measures: Income per capita and welfare of developing countries.

Main findings

• Bankruptcy technology inefficiencies have significant negative effects on income per capita.
• High costs of doing business (obstacles to entrepreneurship) significantly reduce welfare and income per capita.
• The interaction between poor bankruptcy technology and entrepreneurship obstacles can amplify long-run negative outcomes.

Policy recommendations

• Speed up the resolution of private sector insolvency.
• Improve creditor protection.
• Eliminate obstacles to entrepreneurship.
• Implement structural reforms that address bankruptcy technology and entrepreneurship barriers simultaneously.

Subject and keywords

• Subject: Consumption, Credit, Loans, Self-employment, Technology
• Keywords: cost of capital, rate of return, WP

Content in this bundle

• Bankruptcy Technology, Finance and Entrepreneurship, WP/17/188, August 2017
  • Bankruptcy Technology, Finance and Entrepreneurship, WP/17/188, August 2017 (Markdown version)
  • Bankruptcy Technology, Finance and Entrepreneurship, WP/17/188, August 2017 (PDF)