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The role of path dependence in the development of US bankruptcy law, 1880–1938

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  • HANSEN, BRADLEY A.
  • HANSEN, MARY ESCHELBACH

Abstract

We illustrate mechanisms that can give rise to path dependence in legislation. Specifically, we show how debtor-friendly bankruptcy law arose in the United States as a result of a path dependent process. The 1898 Bankruptcy Act was not regarded as debtor-friendly at the time of its enactment, but the enactment of the law gave rise to changes in interest groups, changes in beliefs about the purpose of bankruptcy law, and changes in the Democratic Party's position on bankruptcy that set the United States on a path to debtor-friendly bankruptcy law. An analysis of the path dependence of bankruptcy law produces an interpretation that is more consistent with the evidence than the conventional interpretation that debtor-friendliness in bankruptcy law began with political compromises to obtain the 1898 Bankruptcy Act.

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  • Hansen, Bradley A. & Hansen, Mary Eschelbach, 2007. "The role of path dependence in the development of US bankruptcy law, 1880–1938," Journal of Institutional Economics, Cambridge University Press, vol. 3(2), pages 203-225, August.
    • Handle: RePEc:cup:jinsec:v:3:y:2007:i:02:p:203-225_00
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    Cited by:

    1. Mary Eschelbach Hansen, 2014. "Sources of Credit and the Extent of the Credit Market: A View from Bankruptcy Records, Mississippi 1929-1936," Working Papers 2014-09, American University, Department of Economics.
    2. Mary Eschelbach Hansen & Nicolas L. Ziebarth, 2017. "Credit Relationships and Business Bankruptcy during the Great Depression," American Economic Journal: Macroeconomics, American Economic Association, vol. 9(2), pages 228-255, April.

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