Employment Policy and Bankruptcy Law - Does Legal Tradition Matter?
Nuno M. Garoupa
Texas A&M University School of Law; Catholic University of Portugal (UCP) - Católica Global School of Law
António José Morgado
Universidade Nova de Lisboa - School of Economics
In this paper we analyze the relationship between strictness of employment protection and efficiency of bankruptcy law. We argue that country's legal tradition provides the appropriate institutional proxy to explain the nature of such relationship. We find that for civil law countries where bankruptcy procedures are more inefficient a stricter employment protection policy is enforced. For common law countries no relationship between employment protection and bankruptcy law is obtained. These results support the thesis that inefficiencies in bankruptcy law help employment protection policies for interventionist governments. They are also consistent with normative theories of bankruptcy for common law countries.
Number of Pages in PDF File: 39
Keywords: bankruptcy law, employment protection, legal origin
JEL Classification: K0
Date posted: February 21, 2006