This paper studies the interaction of capital constraints with business formation, growth and destruction, and the policy implications of this interaction. A dynamic general equilibrium model is constructed and shown to be consistent with recent empirical finding on this subject. In the model,...

Because of the recent surge in U.S. personal defaults, Congress is currently debating bankruptcy reform legislation requiring a means test for Chapter 7 filers. This paper explores the effects of such a reform in a model where, in contrast to previous work, bankruptcy options and production are...