Consumer bankruptcy: A fresh start


Livshits, Igor ; MacGee, James ; Tertilt, Michèle



URL: https://www.minneapolisfed.org/research/wp/wp617.p...
Additional URL: https://ideas.repec.org/p/fip/fedmwp/617.html
Document Type: Working paper
Year of publication: 2003
The title of a journal, publication series: Working Paper / Federal Reserve Bank of Minneapolis, Research Department
Volume: 617
Place of publication: Minneapolis, MN
Related URLs: https://econpapers.repec.org/paper/fipfedmwp/617.htm
Publication language: English
Institution: School of Law and Economics > VWL, Makro- u. Entwicklungsökonomie (Tertilt 2010-)
Subject: 330 Economics
Abstract: American consumer bankruptcy provides for a Fresh Start through the discharge of a household’s debt. Until recently, many European countries specified a No Fresh Start policy of life-long liability for debt. The trade-off between these two policies is that while Fresh Start provides insurance across states, it drives up interest rates and thereby makes life-cycle smoothing more difficult. This paper quantitatively compares these bankruptcy rules using a life-cycle model with incomplete markets calibrated to the U.S. and Germany. A key innovation is that households face idiosyncratic uncertainty about their net asset holdings (expense shocks) and labor income. We find that expense uncertainty plays a key role in evaluating consumer bankruptcy laws.

Dieser Datensatz wurde nicht während einer Tätigkeit an der Universität Mannheim veröffentlicht, dies ist eine Externe Publikation.




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Livshits, Igor ; MacGee, James ; Tertilt, Michèle (2003) Consumer bankruptcy: A fresh start. Working Paper / Federal Reserve Bank of Minneapolis, Research Department Minneapolis, MN 617 [Working paper]


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