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Divorce Rates and Bankruptcy Exemption Levels in the United States

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  • Jeffrey Traczynski

Abstract

Although increasing bankruptcy exemption levels protects consumers from negative asset shocks, an unintended consequence of this policy that remains unexplored is the effect on divorce rates. This effect arises from reducing the benefits of marital risk sharing. I establish conditions under which increases in exemption levels lead to more divorce and investigate using data from Vital Statistics of the United States. I estimate that increases in exemption levels occurring between 1989 and 2005 resulted in more than 200,000 additional divorces during this period and that the effect on divorce rates in 2005 is comparable in magnitude to that found for the introduction of unilateral divorce laws by Wolfers.

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  • Jeffrey Traczynski, 2011. "Divorce Rates and Bankruptcy Exemption Levels in the United States," Journal of Law and Economics, University of Chicago Press, vol. 54(3), pages 751-779.
    • Handle: RePEc:ucp:jlawec:doi:10.1086/661234
    DOI: 10.1086/661234
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    Cited by:

    1. Kleiner, Kristoph & Stoffman, Noah & Yonker, Scott E., 2021. "Friends with bankruptcy protection benefits," Journal of Financial Economics, Elsevier, vol. 139(2), pages 578-605.
    2. repec:ces:ifodic:v:13:y:2016:i:4:p:19191579 is not listed on IDEAS
    3. repec:ces:ifodic:v:13:y:2016:i:4:p:19189881 is not listed on IDEAS
    4. Pattison, Nathaniel, 2020. "Consumption smoothing and debtor protections," Journal of Public Economics, Elsevier, vol. 192(C).
    5. Corradin, Stefano & Gropp, Reint & Huizinga, Harry & Laeven, Luc, 2016. "The effect of personal bankruptcy exemptions on investment in home equity," Journal of Financial Intermediation, Elsevier, vol. 25(C), pages 77-98.
    6. Traczynski, Jeffrey, 2020. "Tenancy by the Entirety and the Value of Wealth Insurance for Entrepreneurs," IZA Discussion Papers 13173, Institute of Labor Economics (IZA).
    7. Michelle J. White, 2016. "Economics of Personal Bankruptcy and Insolvency," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 13(04), pages 03-07, February.
    8. Jeffrey Traczynski, 2016. "Personal Bankruptcy and Social Insurance," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 13(4), pages 23-27, 02.
    9. Gan, Li & Hernandez, Manuel A. & Zhang, Shuoxun, 2021. "Insurance or deliberate use of the bankruptcy law for financial gain? Testing for heterogeneous filing behaviors in the United States," Economic Modelling, Elsevier, vol. 105(C).
    10. Michelle J. White, 2016. "Economics of Personal Bankruptcy and Insolvency," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 13(4), pages 03-07, 02.
    11. Jeffrey Traczynski, 2016. "Personal Bankruptcy and Social Insurance," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 13(04), pages 23-27, February.

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