Accounting for the rise in consumer bankruptcies

Tertilt, Michèle ; Livshits, Igor ; MacGee, Jim

DOI:	https://doi.org/10.3386/w13363
URL:	https://www.nber.org/papers/w13363
Weitere URL:	https://ideas.repec.org/p/nbr/nberwo/13363.html
Dokumenttyp:	Arbeitspapier
Erscheinungsjahr:	2007
Titel einer Zeitschrift oder einer Reihe:	NBER Working Paper
Band/Volume:	13363
Ort der Veröffentlichung:	Cambridge, MA
Sprache der Veröffentlichung:	Englisch
Einrichtung:	Fakultät für Rechtswissenschaft und Volkswirtschaftslehre > Makro- u. Entwicklungsökonomie (Tertilt 2010-)
Fachgebiet:	330 Wirtschaft
Abstract:	Personal bankruptcies in the United States have increased dramatically, rising from 1.4 per thousand working age population in 1970 to 8.5 in 2002. We use a heterogeneous agent life-cycle model with competitive financial intermediaries who can observe households' earnings, age and current asset holdings to evaluate several commonly offered explanations. We find that increased uncertainty (income shocks, expense uncertainty) cannot quantitatively account for the rise in bankruptcies. Instead, the rise in filings appears to mainly reflect changes in the credit market environment. We find that credit market innovations which cause a decrease in the transactions cost of lending and a decline in the cost of bankruptcy can largely accounting for the rise in consumer bankruptcy. We also argue that the abolition of usury laws and other legal changes are unimportant.