PROJECT

LIMITED LIABILITY AND ECONOMIC ACTIVITY: EVIDENCE FROM COLOMBIA

Researcher: Lorenzo Pessina, PhD Student in Economics

Throughout their entire existence, entrepreneurs and firms interact with the legal system of the country in which they operate. One of the very early decisions that every entrepreneur makes is the choice of the organizational form of the firm. While governments pose few restrictions on the freedom to contract between private individuals (natural and legal persons, alike), they usually offer only a limited set of options under which firms could operate. This research project investigates the economic effects of the introduction of a flexible enterprise form that allows for limited liability on firm investments (similar to the Limited Liability Company, LLC available in the United States) in Colombia in 2008. The analysis will use the rich data available in the Encuesta Anual Manufacturera (EAM), the annual survey of manufacturing establishments.