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, DjankovRead More »