Who invests in home equity to exempt wealth from bankruptcy?
AbstractHomestead exemptions to personal bankruptcy allow households to retain their home equity up to a limit determined at the state level. Households that may experience bankruptcy thus have an incentive to bias their portfolios towards home equity. Using US household data from the Survey of Income and Program Participation for the period 1996-2006, we find that especially households with low net worth maintain a larger share of their wealth as home equity if a larger homestead exemption applies. This home equity bias is also more pronounced if the household head is in poor health, increasing the chance of bankruptcy on account of unpaid medical bills. The bias is further stronger for households with mortgage finance, shorter house tenures, and younger household heads, which taken together reflect households that face more financial uncertainty. JEL Classification: G11, K35, R21
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by European Central Bank in its series Working Paper Series with number 1337.
Date of creation: May 2011
Date of revision:
Contact details of provider:
Postal: Postfach 16 03 19, Frankfurt am Main, Germany
Phone: +49 69 1344 0
Fax: +49 69 1344 6000
Web page: http://www.ecb.europa.eu/home/html/index.en.html
More information through EDIRC
Postal: Press and Information Division, European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany
Other versions of this item:
- Corradin, Stefano & Gropp, Reint & Huizinga, Harry & Laeven, Luc, 2010. "Who Invests in Home Equity to Exempt Wealth from Bankruptcy?," CEPR Discussion Papers 8097, C.E.P.R. Discussion Papers.
- Corradin, S. & Gropp, R. & Huizinga, H.P. & Laeven, L., 2010. "Who Invests in Home Equity to Exempt Wealth from Bankruptcy?," Discussion Paper 2010-118, Tilburg University, Center for Economic Research.
- Corradin, Stefano & Gropp, Reint & Huizinga, Harry & Laeven, Luc, 2013. "Who invests in home equity to exempt wealth from bankruptcy?," SAFE Working Paper Series 21, Center of Excellence SAFE - Sustainable Architecture for Finance in Europe, Goethe University Frankfurt.
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- K35 - Law and Economics - - Other Substantive Areas of Law - - - Personal Bankruptcy Law
- R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Corradin, Stefano & Fillat, José L. & Vergara-Alert, Carles, 2012.
"Optimal portfolio choice with predictability in house prices and transaction costs,"
Working Paper Series
1470, European Central Bank.
- Stefano Corradin & José L. Fillat & Carles Vergara-Alert, 2010. "Optimal portfolio choice with predictability in house prices and transaction costs," Risk and Policy Analysis Unit Working Paper QAU10-2, Federal Reserve Bank of Boston.
- Corradin, Stefano & Fillat, Jose L. & Vergara, Carles, 2012. "Optimal portfolio choice with predictability in house prices and transaction costs," IESE Research Papers D/948, IESE Business School.
- Berkowitz, Jeremy & Hynes, Richard, 1999. "Bankruptcy Exemptions and the Market for Mortgage Loans," Journal of Law and Economics, University of Chicago Press, vol. 42(2), pages 809-30, October.
- Li, Mingche M, 1977. "A Logit Model of Homeownership," Econometrica, Econometric Society, vol. 45(5), pages 1081-97, July.
- Edward L. Glaeser & Bruce Sacerdote, 1996.
"Why Is There More Crime in Cities?,"
NBER Working Papers
5430, National Bureau of Economic Research, Inc.
- Edward L. Glaeser & Bruce Sacerdote, 1996. "Why is There More Crime in Cities?," Harvard Institute of Economic Research Working Papers 1746, Harvard - Institute of Economic Research.
- Raj Chetty & Adam Szeidl, 2010. "The Effect of Housing on Portfolio Choice," NBER Working Papers 15998, National Bureau of Economic Research, Inc.
- Chiuri, Maria Concetta & Jappelli, Tullio, 2001.
"Financial Market Imperfections and Home Ownership: A Comparative Study,"
CEPR Discussion Papers
2717, C.E.P.R. Discussion Papers.
- Chiuri, Maria Concetta & Jappelli, Tullio, 2003. "Financial market imperfections and home ownership: A comparative study," European Economic Review, Elsevier, vol. 47(5), pages 857-875, October.
- Maria Concetta Chiuri & Tullio Jappelli, 2000. "Financial Market Imperfections and Home Ownership: A Comparative Study," CSEF Working Papers 44, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 01 Dec 2000.
- Igor Livshits & James MacGee & Michele Tertilt, 2005.
"Consumer Bankruptcy: A Fresh Start,"
04-011, Stanford Institute for Economic Policy Research.
- Gropp, Reint & Scholz, John Karl & White, Michelle J, 1997.
"Personal Bankruptcy and Credit Supply and Demand,"
The Quarterly Journal of Economics,
MIT Press, vol. 112(1), pages 217-51, February.
- Wei Fan & Michelle J. White, 2002. "Personal Bankruptcy and the Level of Entrepreneurial Activity," NBER Working Papers 9340, National Bureau of Economic Research, Inc.
- Joao F. Cocco, 2005. "Portfolio Choice in the Presence of Housing," Review of Financial Studies, Society for Financial Studies, vol. 18(2), pages 535-567.
- King, Mervyn A. & Leape, Jonathan I., 1998. "Wealth and portfolio composition: Theory and evidence," Journal of Public Economics, Elsevier, vol. 69(2), pages 155-193, June.
- Zame, William R, 1993.
"Efficiency and the Role of Default When Security Markets Are Incomplete,"
American Economic Review,
American Economic Association, vol. 83(5), pages 1142-64, December.
- William R. Zame, 1992. "Efficiency and the Role of Default When Security Markets are Incomplete," UCLA Economics Working Papers 673, UCLA Department of Economics.
- William R. Zame, 1990. "Efficiency and the Role of Default When Security Markets are Incomplete," UCLA Economics Working Papers 585, UCLA Department of Economics.
- Li, Wenli & Sarte, Pierre-Daniel, 2006. "U.S. consumer bankruptcy choice: The importance of general equilibrium effects," Journal of Monetary Economics, Elsevier, vol. 53(3), pages 613-631, April.
- Hynes, Richard M & Malani, Anup & Posner, Eric A, 2004. "The Political Economy of Property Exemption Laws," Journal of Law and Economics, University of Chicago Press, vol. 47(1), pages 19-43, April.
- Jeremy Berkowitz & Michelle J. White, 2004. "Bankruptcy and Small Firms' Access to Credit," RAND Journal of Economics, The RAND Corporation, vol. 35(1), pages 69-84, Spring.
- Athreya, Kartik B., 2002. "Welfare implications of the Bankruptcy Reform Act of 1999," Journal of Monetary Economics, Elsevier, vol. 49(8), pages 1567-1595, November.
- Scott Fay & Erik Hurst & Michelle J. White, 2002. "The Household Bankruptcy Decision," American Economic Review, American Economic Association, vol. 92(3), pages 706-718, June.
- Marjorie Flavin & Takashi Yamashita, 2002. "Owner-Occupied Housing and the Composition of the Household Portfolio," American Economic Review, American Economic Association, vol. 92(1), pages 345-362, March.
- Berger, Allen N. & Cerqueiro, Geraldo & Penas, María F., 2011. "Does debtor protection really protect debtors? Evidence from the small business credit market," Journal of Banking & Finance, Elsevier, vol. 35(7), pages 1843-1857, July.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Official Publications).
If references are entirely missing, you can add them using this form.