Title page
Contents
Abstract 2
Non-technical summary 3
1. Introduction 5
2. The Portuguese bankruptcy system 10
3. Data 11
3.1. Descriptive Statistics 13
4. Identification strategy 14
4.1. Empirical model 14
4.2. First stage estimates 18
5. Results 21
5.1. Labor outcomes 21
5.2. Mechanisms 28
5.3. Firm profitability and resource misallocation 34
5.4. Generalizability 36
6. Conclusion 37
References 55
Internet Appendix 59
A. The Portuguese bankruptcy system 82
B. Variable Definitions 85
C. Data appendix 90
D. Estimating production functions 99
E. Alternative empirical models 101
F. Selection into employment 106
References 107
Table 1. Descriptive statistics 39
Table 2. First stage 40
Table 3. Random judge assignment 41
Table 4. Reallocation outcomes 42
Table 5. Job transitions 42
Table 6. Earnings outcomes 43
Table 7. Relationship between judge leniency and earnings by worker group 43
Table 8. Human capital 44
Table 9. Decomposition of the earnings effect 45
Table 10. Job search frictions 46
Table 11. Net benefit of reorganization 47
Figure 1. Reorganization in the Portuguese Bankruptcy Code 48
Figure 2. Judicial leniency distribution 48
Figure 3. Worker reallocation over time 49
Figure 4. Job transitions and earnings quintiles 50
Figure 5. Employment and earnings growth in reorganized firms 51
Figure 6. Earnings premiums at reorganized firms 52
Figure 7. Job transitions and earnings quintiles: firm component 53
Figure 8. Employment and earnings growth in reorganized firms 54
Table A1. Industries 59
Table A2. Instrument robustness: pre-trends 60
Table A3. Worker outcomes within filers 61
Table A4. First stage by group 62
Table A5. Additional earnings outcomes 63
Table A6. Additional labor outcomes 64
Table A7. Employment transitions by earnings quintile 65
Table A8. Characteristics of workers from reorganized firms 66
Table A9. Interaction between reorganization and sample characteristics 67
Table A10. Transition to new occupations 69
Table A11. Transition to new occupations (continuous variable) 71
Table A12. Additional sample splits: hierarchy 72
Table A13. Decomposition of the earnings effect: robustness 73
Table A14. Additional sample splits: thickness 74
Table A15. Firm characteristics 75
Table A16. Estimated outcomes for workers outside of the sample 91
Table A17. Output elasticity estimates 100
Table A18. Alternative specifications 104
Figure A1. Firm outcomes 76
Figure A2. Worker exits 77
Figure A3. Earnings and employment paths 78
Figure A4. Year-by-year second stage results 79
Figure A5. Earnings growth and judge leniency: year-by-year results 80
Figure A6. Earnings premiums at reorganized firms: by hierarchy 81
Figure A7. Example of court record from Citius 97
Figure A8. Example of PDF file from Citius 98