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We study how Chapter 11 bankruptcies affect local legal labor markets.We document that bankruptcy shocks increase county legal employment and corroborate this finding by exploiting a stipulation of the law known as Forum Shopping during the Court Competition Era (1991-1996).We quantify losses to local communities from firms forum shopping away from their local area as follows.First, we calculate the unrealized potential employment gains implied by our reduced-form results.Second, we structurally estimate a model of legal labor markets and quantify welfare losses.We uncover meaningful costs to local communities from lax bankruptcy venue laws.
Brown et al. (Wed,) studied this question.