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dc.contributor.authorFossen, Frank M.en_US
dc.description.abstractA personal bankruptcy law that allows for a fresh start after bankruptcy reduces the individual risk involved in entrepreneurial activity. On the other hand, as risk shifts to creditors who recover less of their credit after a debtor's bankruptcy, lenders may charge higher interest rates or ration credit supply, which can hamper entrepreneurship. Both aspects of a more forgiving personal bankruptcy law are less relevant for wealthy potential entrepreneurs who still risk losing their wealth, but tend not to face higher interest rates because they provide collateral. This paper illustrates these effects in a model and tests the hypotheses derived by exploiting the introduction of a fresh start policy in Germany in 1999 as a natural experiment, based on representative household panel data. The results indicate that the insurance effect of a more forgiving personal bankruptcy law exceeds the interest effect and on balance encourages less wealthy individuals to enter into entrepreneurship.en_US
dc.publisherDeutsches Institut für Wirtschaftsforschung (DIW) Berlinen_US
dc.relation.ispartofseriesDiscussion papers // German Institute for Economic Research 1100en_US
dc.subject.keywordpersonal bankruptcy lawen_US
dc.subject.keywordfresh starten_US
dc.titlePersonal bankruptcy law, wealth and entrepreneurship: Theory and evidence from the introduction of a "fresh start"en_US
dc.typeWorking Paperen_US
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Publikationen von Forscherinnen und Forschern des DIW

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