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Articles by Djankov, Zhang

Divergence in bankruptcy law across advanced and developing economies

July 9, 2021

The economic shock triggered by Covid-19 shut down thousands of businesses and cost millions of workers their jobs. The goal of government response to this shock was simple: keep the lights on for as long as possible. This column describes how while some advanced economies have moved ahead with changes in their bankruptcy law to make it easier for distressed companies to keep running, developing countries have not reformed their procedures. A possible solution is to devise policies that reduce the share of the informal economy and put more pressure on reforming formal institutions.

In 2020, bankruptcies fell sharply because of the array of support measures available to businesses, as well as imposed moratoria on bankruptcy filings (Eckert et al. 2020, Djankov

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Convergence in tax services through online technology

July 2, 2021

The advent of online technology in public services has made one ingredient of effective state building – easy taxes – possible to achieve in developing economies. This column describes how, fuelled by new technology, the time that it takes businesses to comply with tax requirements has fallen on average by 91 hours a year and the average number of payments was cut by 11 in the past 15 years. Accommodating policies for expanding the tax base are also needed, so everyone sees the upside from online tax services.

Adam Smith memorably stated in 1755 that “[l]ittle else is required to carry the state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice, all the rest being brought about by the

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US business dynamism rises

March 3, 2021

In 2020, the creation of US startups shot up by 24% relative to the previous year. This is the largest annual increase since business statistics started being collected in the US. Some of this boom in entrepreneurial activity is accounted for by the migration of businesses to online activity. 
This business dynamism is unexpected. Vox columns written in early 2020 (e.g. Baker et al. 2020, Coibion et al. 2020, Sedláček and Sterk 2020, Calvino et al. 2020) recorded steep falls in entrepreneurial activity across G7 economies. In a recent paper (Djankov and Zhang 2021), we show that such falls were indeed the norm across advanced economies at the end of 2020. The US is an exception, fuelled by the government assistance provided to small businesses.
The focus on new entry is

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As COVID rages, bankruptcy cases fall

February 4, 2021

Economic crises bring an upturn in bankruptcies. Companies suffering losses struggle to survive, and many fail. A wave of bankruptcy filings was expected in the wake of COVID-19 too (Bailey et al. 2021). Yet during 2020, the number of corporate bankruptcy filings in most advanced economies – members of the OECD – fell by 17% relative to 2019, and by even more relative to previous years (Figure 1). This decline in bankruptcy cases demonstrates the success of the initial COVID-19 response measures. On second glance, however, it brings worries too (Blanchard et al. 2020).
Figure 1 Average 2020 bankruptcy filings are 17% lower than in 2019

Note: The index is based on total number of bankruptcies in 25 advanced economies (Australia, Austria, Belgium, Canada, the Czech Republic,

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The expanding gender gap in the US due to Covid-19

November 26, 2020

The rebound in jobs for men in the US was swift after the initial weeks of the Covid pandemic, but not so for women. This column highlights three areas for change to alleviate the burden on working women in the US. First, legal changes are needed to both federal and state-level regulation, with a particular focus on parental leave and pension rules. Second, vocational training incentives with a particular focus on women are needed. Third, future recovery programmes may do well to take the actual gender pay gap – factoring in unpaid work that women do in the household – into consideration.

By the beginning of 2020, women’s labour force participation in the US stood at 58%, nearly a three-fold increase in the past century (Figure 1, first panel). By October

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