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Personal Bankruptcy and Credit Supply and Demand

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Author Info

  • Gropp, Reint
  • Scholz, John Karl
  • White, Michelle J

Abstract

This paper examines how personal bankruptcy and bankruptcy exemptions affect the supply and demand for credit. While generous state-level bankruptcy exemptions are probably viewed by most policymakers as benefiting less-well-off borrowers, the authors' results using data from the 1983 Survey of Consumer Finances suggest that they increase the amount of credit held by high-asset households and reduce the availability and amount of credit to low-asset households, conditioning on observable characteristics. Thus, bankruptcy exemptions redistribute credit toward borrowers with high assets. Interest rates on automobile loans for low-asset households also appear to be higher in high exemption states. Copyright 1997, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Bibliographic Info

Article provided by MIT Press in its journal Quarterly Journal of Economics.

Volume (Year): 112 (1997)
Issue (Month): 1 (February)
Pages: 217-51

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Handle: RePEc:tpr:qjecon:v:112:y:1997:i:1:p:217-51

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Web page: http://mitpress.mit.edu/journals/

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Web: http://mitpress.mit.edu/journal-home.tcl?issn=00335533

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References

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  1. Jaffee, Dwight & Stiglitz, Joseph, 1990. "Credit rationing," Handbook of Monetary Economics, in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 2, chapter 16, pages 837-888 Elsevier.
  2. N. Gregory Mankiw, 1986. "The Allocation of Credit and Financial Collapse," NBER Working Papers 1786, National Bureau of Economic Research, Inc.
  3. Jappelli, Tullio, 1990. "Who Is Credit Constrained in the U.S. Economy?," The Quarterly Journal of Economics, MIT Press, vol. 105(1), pages 219-34, February.
  4. Bester, Helmut, 1994. "The Role of Collateral in a Model of Debt Renegotiation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(1), pages 72-86, February.
  5. Boyes, William J. & Hoffman, Dennis L. & Low, Stuart A., 1989. "An econometric analysis of the bank credit scoring problem," Journal of Econometrics, Elsevier, vol. 40(1), pages 3-14, January.
  6. Boot, Arnoud W A & Thakor, Anjan V & Udell, Gregory F, 1991. "Secured Lending and Default Risk: Equilibrium Analysis, Policy Implications and Empirical Results," Economic Journal, Royal Economic Society, vol. 101(406), pages 458-72, May.
  7. Bester, Helmut, 1985. "Screening vs. Rationing in Credit Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 75(4), pages 850-55, September.
  8. Cox, Donald & Jappelli, Tullio, 1993. "The Effect of Borrowing Constraints on Consumer Liabilities," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(2), pages 197-213, May.
  9. Dye, Ronald A, 1986. "An Economic Analysis of Bankruptcy Statutes," Economic Inquiry, Western Economic Association International, vol. 24(3), pages 417-28, July.
  10. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
  11. Richard T. Curtin & Thomas Juster & James N. Morgan, 1989. "Survey Estimates of Wealth: An Assessment of Quality," NBER Chapters, in: The Measurement of Saving, Investment, and Wealth, pages 473-552 National Bureau of Economic Research, Inc.
  12. Rea, Samuel A, Jr, 1984. "Arm-breaking, Consumer Credit and Personal Bankruptcy," Economic Inquiry, Western Economic Association International, vol. 22(2), pages 188-208, April.
  13. F. Thomas Juster & Kathleen A. Kuester, 1990. "Differences in the measurement of wealth, wealth inequality, and wealth composition obtained from alternative U.S. wealth surveys," Finance and Economics Discussion Series 116, Board of Governors of the Federal Reserve System (U.S.).
  14. Perraudin, William R M & Sorensen, Bent E, 1992. "The Credit-Constrained Consumer: An Empirical Study of Demand and Supply in the Loan Market," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(2), pages 179-92, April.
  15. Charles A. Luckett, 1988. "Personal bankruptcies," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Sep, pages 591-603.
  16. Peterson, Richard L. & Aoki, Kiyomi, 1984. "Bankruptcy filings before and after implementation of the bankruptcy reform law," Journal of Economics and Business, Elsevier, vol. 36(1), pages 95-105, February.
  17. Robert E. Lipsey & Helen Stone Tice, 1989. "The Measurement of Saving, Investment, and Wealth," NBER Books, National Bureau of Economic Research, Inc, number lips89-1.
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