IDEAS home Printed from https://ideas.repec.org/a/oup/oxecpp/v62y2010i3p553-577.html
   My bibliography  Save this article

Economic performance, creditor protection, and labour inflexibility

Author

Listed:
  • Felipe Balmaceda
  • Ronald Fischer

Abstract

We present a static general equilibrium model of an open economy where agents are heterogeneous in terms of observable wealth and there are endogenous credit constraints due to imperfect creditor protection. Improved credit protection, harder assets, and more efficient bankruptcy procedures increase output, investment, and credit penetration. Better credit protection and harder assets lead to higher interest rate spreads. In a capital constrained (unconstrained) economy, greater (lower) wealth inequality leads to higher (lower) investment and output. Interest rate spreads are lower in richer and more unequal economies in terms of their wealth distribution. We also show that increased labour protection leads to lower wages and output in the presence of credit market imperfections. Nevertheless, increased protection benefits workers in (and owners of) firms with strong balance sheets. Copyright 2010 Oxford University Press 2009 All rights reserved, Oxford University Press.

Suggested Citation

  • Felipe Balmaceda & Ronald Fischer, 2010. "Economic performance, creditor protection, and labour inflexibility," Oxford Economic Papers, Oxford University Press, vol. 62(3), pages 553-577, July.
    • Handle: RePEc:oup:oxecpp:v:62:y:2010:i:3:p:553-577
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/oep/gpp033
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Fischer, Ronald & Huerta, Diego, 2021. "Wealth inequality and the political economy of financial and labour regulations," Journal of Public Economics, Elsevier, vol. 204(C).
    2. Viviana Fernández & Brian M. Lucey, 2008. "Emerging Markets Variance Shocks: Local or International in Origin?," Documentos de Trabajo 251, Centro de Economía Aplicada, Universidad de Chile.
    3. Fischer, Ronald & Valenzuela, Patricio, 2013. "Financial openness, market structure and private credit: An empirical investigation," Economics Letters, Elsevier, vol. 121(3), pages 478-481.
    4. Janiak, Alexandre, 2008. "Welfare in Models of Trade with Heterogeneous Firms," IZA Discussion Papers 3803, Institute of Labor Economics (IZA).
    5. Felipe Balmaceda, 2018. "Entrepreneurship: skills and financing," Small Business Economics, Springer, vol. 50(4), pages 871-886, April.
    6. Andreasen, Eugenia & Valenzuela, Patricio, 2016. "Financial openness, domestic financial development and credit ratings," Finance Research Letters, Elsevier, vol. 16(C), pages 11-18.
    7. Antonio Romero-Medina & Matteo Triossi, 2012. "Neutral Mergers Between Bilateral Markets," Documentos de Trabajo 292, Centro de Economía Aplicada, Universidad de Chile.
    8. Triossi, Matteo, 2018. "Centralized Course Allocation," UC3M Working papers. Economics 27388, Universidad Carlos III de Madrid. Departamento de Economía.
    9. Fischer, Ronald & Huerta, Diego & Valenzuela, Patricio, 2019. "The inequality-credit nexus," Journal of International Money and Finance, Elsevier, vol. 91(C), pages 105-125.
    10. Ronald Fischer & Nicolás Inostroza & Felipe J. Ramírez, 2015. "Banking Competition and Economic Stability," Documentos de Trabajo 320, Centro de Economía Aplicada, Universidad de Chile.
    11. Felipe Balmaceda, 2012. "On the Optimality of One-size-fits-all Contracts: The Limited Liability Case," Documentos de Trabajo 291, Centro de Economía Aplicada, Universidad de Chile.
    12. Ronald Fischer & Diego Huerta, 2015. "Economic Performance, Wealth Distribution and Credit Restrictions Under Variable Investment: The Open Economy," Working Papers Central Bank of Chile 765, Central Bank of Chile.
    13. Balmaceda, Felipe & Fischer, Ronald D. & Ramirez, Felipe, 2014. "Financial liberalization, market structure and credit penetration," Journal of Financial Intermediation, Elsevier, vol. 23(1), pages 47-75.
    14. Balmaceda, Felipe & Escobar, Juan F., 2017. "Trust in cohesive communities," Journal of Economic Theory, Elsevier, vol. 170(C), pages 289-318.
    15. Ronald Fischer & Diego Huerta, 2016. "Economic Performance, Wealth Distribution and Credit Restrictions with Continuous Investment," Documentos de Trabajo 326, Centro de Economía Aplicada, Universidad de Chile.
    16. Diego Huerta & Ronald Fischer & Patricio Valenzuela, 2015. "Inequality and Private Credit," Documentos de Trabajo 316, Centro de Economía Aplicada, Universidad de Chile.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:oxecpp:v:62:y:2010:i:3:p:553-577. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://academic.oup.com/oep .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.