Risk, Relief, and Reward: Personal Bankruptcy Protections and Corporate Labour Income Share

ABSTRACT

This study investigates the introduction of personal bankruptcy protections on corporate labour income share. Following China's staggered implementation of personal bankruptcy systems in select cities, we find higher corporate labour income shares. Mechanism analyses indicate that increases to personal bankruptcy protections increase employee bargaining power to facilitate higher labour investments. Cross‐sectional analyses indicate differences among firms based on employee age, education, and incentives. The findings contribute to understanding the labour supply drivers of labour income share, the impact of personal bankruptcy protections, and provide insights for policymakers in fostering equitable economic development.