The Directorate-General Justice in the European Commission is working on a follow-up to the 2012 Communication of the Commission on “A new approach to business failure and insolvency” and the 2013 public consultation on the same topic. Against this background a study has been commissioned to...

In this paper we develop a quantitative model of entrepreneurial activity (risk-taking) and consumer bankruptcy choices and use the model to study the effects of bankruptcy regulations on entrepreneurial activity, bankruptcy rate and welfare. We show that eliminating bankruptcy exemptions leads...

This paper analyzes endogenous fluctuations in total factor productivity (TFP) in a dynamic general equilibrium model with heterogeneous agents, and illustrates the interaction of credit market frictions, asset prices, the entry and exit of firms, and fluctuations in TFP in response to...

We provide a model with endogenous portfolios of secured and unsecured household debt. Secured debt is collateralized by durables whereas unsecured debt can be discharged in bankruptcy procedures. We show that the model matches the main quantitative characteristics of observed wealth and debt...

This paper studies loan activity in a context where banks must follow Basel Accord-type rules and acquire financing from households. Loan activity typically decreases when entrepreneurs' investment returns decline, and we study which type of policy could revigorate an economy in a trough. We...

There is considerable consensus in the literature that entrepreneurs are prone to unrealistic optimism. Our new field evidence from a sample of four-month-old start-ups echoes this finding: as many as 87% of new entrepreneurs expect to survive at least three years in business, whereas the actual...