The Role of Path Dependence in the Development of U.S. Bankruptcy Law, 1880-1938

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The Role of Path Dependence in the Development of U.S. Bankruptcy Law, 1880-1938

Author Info

Bradley A. Hansen
Mary Eschelbach Hansen () (Department of Economics, American University)

Abstract

This paper provides an illustration of the mechanisms that can give rise to path dependence in legislation. Specifically it shows 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, beliefs about the purpose of bankruptcy law, and political party positions on bankruptcy that set the United States on a path to debtor-friendly bankruptcy law. Analysis of the path dependence of bankruptcy law produces an interpretation that is more consistent with the evidence than the standard interpretation that debtor-friendly bankruptcy law was the result of a political compromise in 1898.

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Paper provided by American University, Department of Economics in its series Working Papers with number 2005-14.

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Length: 37 pages
Date of creation: Dec 2005
Date of revision:
Handle: RePEc:amu:wpaper:1405

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Find related papers by JEL classification:
N42 - Economic History - - Government, War, Law, and Regulation - - - U.S.; Canada: 1913-

This paper has been announced in the following NEP Reports:

NEP-ALL-2006-02-05 (All new papers)
NEP-CBE-2006-02-05 (Cognitive & Behavioural Economics)
NEP-HIS-2006-02-05 (Business, Economic & Financial History)

References listed on IDEAS
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Stephen Nunez, 2004. "Bankruptcy "Reform" in Congress: Creditors, Committees, Ideology, and Floor Voting in the Legislative Process," Journal of Law, Economics and Organization, Oxford University Press, vol. 20(2), pages 527-557, October.
North, Douglass C, 1991. "Institutions," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 97-112, Winter. [Downloadable!] (restricted)
Poole, Keith T & Rosenthal, Howard, 1993. "The Enduring Nineteenth-Century Battle for Economic Regulation: The Interstate Commerce Act Revisited," Journal of Law & Economics, University of Chicago Press, vol. 36(2), pages 837-60, October.
Irwin, Douglas A & Kroszner, Randall S, 1999. "Interests, Institutions, and Ideology in Securing Policy Change: The Republican Conversion to Trade Liberalization after Smoot-Hawley," Journal of Law & Economics, University of Chicago Press, vol. 42(2), pages 643-73, October.

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