IESET.
Hypotheses·regulatory·bankruptcy_law_efficiency_capital_reallocation

Across countries 1990-2020, faster insolvency and bankruptcy resolution — measured by years to resolve, recovery rate, and strength of insolvency framework index — predicts stronger post- shock productivity recovery than discretionary rescue policy (bailouts, forbearance, and evergreening).

The pre-registered claim is that countries in the top tercile of bankruptcy efficiency show at least 1.5 percentage points higher TFP growth in the five years following a financial shock than countries in the bottom tercile, after controlling for shock severity and initial income.

PARTIALengine/runs/bankruptcy_law_efficiency_capital_reallocation

PARTIAL — coef=+0.02111, p=0.113 (above α=0.05); direction inconclusive

confidence cueThe result is useful, but not decisive. Treat it as a clue, not a settled conclusion.

policy briefMixed or noisy

In ordinary language

Over a long period, do more market-oriented institutions translate into higher income or productivity, once the comparison looks beyond a single success story?

plain answer

The evidence is suggestive but not decisive. coef=+0.02111, p=0.113 (above α=0.05); direction inconclusive

why it matters

This matters because regulatory claims should change belief only when they survive a pre-declared empirical test.

how the test works

It compares 40 country or place units from 1990 to 2020, using a panel fe design, with fixed effects for country and year.

what was measured
What changed
  • Bankruptcy efficiency rule of law proxy
  • Bankruptcy efficiency index
What we checked
  • Productivity growth 5yr post shock
  • Labour productivity growth 5yr post shock
  • Capital reallocation rate
what this does not prove

A single test is not the whole truth. It narrows the claim under a specific sample, time period, and method. Strong policy conclusions need the pattern to survive nearby tests, alternative data, and serious objections.

verification

No evidence packet has been generated yet.

Results

engine/runs/bankruptcy_law_efficiency_capital_reallocation
1007550250199020052020USAGBRDEUFRAITAESPNLD
illustrative sketch · run pending
No coefficients yet. When the model fires, this chart will show tfp_growth_5yr_post_shock across 40 sampled countries over 1990–2020.
The shapes above are stylised — none of the lines are real data.
Placeholder for bankruptcy_law_efficiency_capital_reallocation. Published chart will be generated from engine/runs/bankruptcy_law_efficiency_capital_reallocation/chart_data.json.

Who has skin in the game — schools predicting on this

9 schools list this hypothesis as a test of their position. The chips below are school-level scoreboard outcomes, not a second hypothesis verdict.

hypothesis verdict vs scoreboard outcome

The banner verdict judges this hypothesis as written. The scoreboard asks whether each school's polarity-corrected prediction was right. Raw status is not a school win: SUPPORTED supports schools that needed SUPPORTED, but refutes schools that needed REFUTED.

Austrian Business Cycle Theory (ABCT)wins if MIXEDpartial/no-callChicago School Monetarismwins if MIXEDpartial/no-callClassical Liberalwins if SUPPORTEDpartial/no-callStructuralist / Developmentalistwins if MIXEDpartial/no-callEmpirical Pragmatist (the framework's house position)wins if SUPPORTEDpartial/no-callNew Institutional Economicswins if SUPPORTEDpartial/no-callNew Keynesian (mainstream synthesis)wins if MIXEDpartial/no-callOrdoliberalism (Freiburg School)wins if SUPPORTEDpartial/no-callSocial Democraticwins if MIXEDpartial/no-call

Pre-registration

pre-registered
first-spec commit 5ce4495 · 2026-05-02T19:11:20Z
run generated · 2026-06-29T17:54:28Z

Across countries 1990-2020, faster insolvency and bankruptcy resolution — measured by years to resolve, recovery rate, and strength of insolvency framework index — predicts stronger post- shock productivity recovery than discretionary rescue policy (bailouts, forbearance, and evergreening). The pre-registered claim is that countries in the top tercile of bankruptcy efficiency show at least 1.5 percentage points higher TFP growth in the five years following a financial shock than countries in the bottom tercile, after controlling for shock severity and initial income.

Falsification criterion — what would disprove this

set before the run · honoured after

This hypothesis is considered falsified if:

Not supported if (a) the coefficient on bankruptcy efficiency is not positive and significant at p<0.05 on post-shock TFP growth, OR (b) the top-tercile vs bottom-tercile post-shock TFP growth gap is below 0.75 pp/year, OR (c) the interaction with bailout intensity is positive and significant (indicating that bailouts complement rather than substitute for efficient bankruptcy). A "too-big-to-fail" / bailout-necessity reading wins if bailout intensity is positively associated with recovery and bankruptcy efficiency is insignificant.

formal test & threshold
test:      panel_fe_bankruptcy_efficiency_on_post_shock_recovery
threshold: panel_FE_beta(bankruptcy_efficiency → tfp_growth_5yr_post_shock) > 0 at p<0.05 AND top_tercile_mean_gap >= 0.75 pp/yr AND interaction_beta(bankruptcy_efficiency × bailout) <= 0 or insignificant

Method

Template
panel_fe
Fixed effects
country, year
Clustering
country
Sample
40 countries · 1990 – 2020
Evidence type
associational

Panel FE on post-shock windows only (country-years with a defined shock in t-2 to t). Interaction: bankruptcy efficiency × shock severity. Robustness: event-study around bankruptcy reforms (e.g. UK 2002 Enterprise Act, Germany 1999 Insolvency Code, India 2016 IBC). Placebo: test on non-shock years.

Data

VariableSourceTransform
tfp_growth_5yr_post_shock
outcome
pwt:rtfpnatier 3
log_diff_5yr
labour_productivity_growth_5yr_post_shock
outcome
pwt:rgdpo_per_emptier 3
log_diff_5yr
capital_reallocation_rate
outcome
constructed:std_dev_log_mpktier 5
level
bankruptcy_efficiency_rule_of_law_proxy
treatment
wgi:RL.ESTtier 4
level
bankruptcy_efficiency_index
treatment
world_bank_wdi:IC.REC.COSTtier 2
composite
years_to_resolve_insolvency
treatment
world_bank_wdi:IC.REC.DURStier 2
level
recovery_rate
treatment
world_bank_wdi:IC.REC.COSTtier 2
level
shock_severity_gdp_drop
control
world_bank_wdi:NY.GDP.MKTP.KDtier 2
peak_to_trough_pct
log_initial_gdp_pc
control
world_bank_wdi:NY.GDP.PCAP.KDtier 2
log
bailout_share_gdp
control
constructed:fiscal_cost_banking_crisistier 5
level
trade_openness
control
world_bank_wdi:NE.TRD.GNFS.ZStier 2
level
rule_of_law
control
wgi:RL.ESTtier 4
level

● ready  · ● pending  · ● reconstruct-needed

Detailed result card

Result card — bankruptcy_law_efficiency_capital_reallocation

Verdict: PARTIAL — coef=+0.02111, p=0.113 (above α=0.05); direction inconclusive

Pre-registration

  • Claim: Across countries 1990-2020, faster insolvency and bankruptcy resolution — measured by years to resolve, recovery rate, and strength of insolvency framework index — predicts stronger post- shock productivity recovery than discretionary rescue policy (bailouts, forbearance, and evergreening). The pre-registered claim is that countries in the top tercile of bankruptcy efficiency show at least 1.5 percentage points higher TFP growth in the five years following a financial shock than countries in the bottom tercile, after controlling for shock severity and initial income.
  • Falsification rule: Not supported if (a) the coefficient on bankruptcy efficiency is not positive and significant at p<0.05 on post-shock TFP growth, OR (b) the top-tercile vs bottom-tercile post-shock TFP growth gap is below 0.75 pp/year, OR (c) the interaction with bailout intensity is positive and significant (indicating that bailouts complement rather than substitute for efficient bankruptcy). A "too-big-to-fail" / bailout-necessity reading wins if bailout intensity is positively associated with recovery and bankruptcy efficiency is insignificant.
  • Falsification test: panel_fe_bankruptcy_efficiency_on_post_shock_recovery

Estimate

  • Method: statsmodels OLS FE fallback (linearmodels failed: exog does not have full column rank. If you wish to proceed with model estimation irrespective of the numerical accuracy of coefficient estimates, you can set check_rank=False.)
  • Coefficient (treatment): +0.02111
  • Std error: 0.01333
  • p-value: 0.113
  • Observations: 693, countries: 33
  • Within R²: 0.865
  • Fixed effects: entity=True, time=True
  • Clustering: country

Variables resolved

  • pwt:rtfpna → tfp_growth_5yr_post_shock (outcome, publisher=pwt, n=6407)
  • pwt:rgdpo_per_emp → labour_productivity_growth_5yr_post_shock (outcome, publisher=pwt, n=9529)
  • wgi:RL.EST → bankruptcy_efficiency_rule_of_law_proxy (treatment, publisher=wgi, n=5296)
  • world_bank_wdi:NY.GDP.MKTP.KD → shock_severity_gdp_drop (controls, publisher=world_bank_wdi, n=12104)
  • world_bank_wdi:NY.GDP.PCAP.KD → log_initial_gdp_pc (controls, publisher=world_bank_wdi, n=12104)
  • world_bank_wdi:NE.TRD.GNFS.ZS → trade_openness (controls, publisher=world_bank_wdi, n=10714)
  • wgi:RL.EST → rule_of_law (controls, publisher=wgi, n=5296)

Variables missing data

  • constructed: std_dev_log_mpk (outcome, name=capital_reallocation_rate) — vintage not on disk
  • world_bank_wdi:IC.REC.COST (treatment, name=bankruptcy_efficiency_index) — vintage not on disk
  • world_bank_wdi:IC.REC.DURS (treatment, name=years_to_resolve_insolvency) — vintage not on disk
  • world_bank_wdi:IC.REC.COST (treatment, name=recovery_rate) — vintage not on disk
  • constructed: fiscal_cost_banking_crisis (controls, name=bailout_share_gdp) — vintage not on disk

Generated by scripts/run_panel_fe.py at 2026-06-29T17:54:28+00:00

Strongest opposing argument

Every hypothesis ships with its charitable opposing argument. The framework earns credibility by handling objections at their strongest, not weakest.

Notes

Doing Business insolvency indicators are available from 2003 onward; earlier years are backfilled using academic series (Djankov et al.). Laeven-Valencia banking-crisis dates define the shock episodes. Post-shock windows use 5-year horizons to capture medium-run reallocation.

Authored framework. Read the transparency note.