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The Bankruptcy Decision: Does Stigma Matter?

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Author Info

  • Fay, S.
  • Hurst, E.
  • White, M.J.

Abstract

In this paper, we model and estimate the effects of both bankruptcy stigma and financial benefit on household's decisions to file for bankruptcy. We show that the probability of debtors ling for bankruptcy rises when the level of bankruptcy stigma falls. We also show that the level of bankruptcy stigma has external effects , so that individual households are better off if their own bankruptcy stigma level is lower than that in the same credit pool.

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Bibliographic Info

Paper provided by Michigan - Center for Research on Economic & Social Theory in its series Papers with number 98-01.

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Length: 49 pages
Date of creation: 1998
Date of revision:
Handle: RePEc:fth:michet:98-01

Contact details of provider:
Postal: UNIVERSITY OF MICHIGAN, DEPARTMENT OF ECONOMICS CENTER FOR RESEARCH ON ECONOMIC AND SOCIAL THEORY, ANN ARBOR MICHIGAN U.S.A.

Related research

Keywords: BANKRUPTCY ; DECISION MAKING;

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Cited by:
  1. Kartik Athreya & Xuan S. Tam & Eric R. Young, 2012. "A Quantitative Theory of Information and Unsecured Credit," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(3), pages 153-83, July.
  2. Mamie Marcuss, 2004. "A look at household bankruptcies," Communities and Banking, Federal Reserve Bank of Boston, issue Spr, pages 15-20.
  3. David Andolfatto, 1999. "A Theory of Inalienable Property Rights," Working Papers 99004, University of Waterloo, Department of Economics, revised Nov 1999.
  4. Xuan Tam & Eric Young & Kartik Athreya, 2013. "A Quantitative Theory of Credit Scoring," 2013 Meeting Papers 382, Society for Economic Dynamics.
  5. Kartik B. Athreya & Xuan S. Tam & Eric R. Young, 2009. "Are harsh penalties for default really better?," Working Paper 09-11, Federal Reserve Bank of Richmond.
  6. David B. Gross, 2002. "An Empirical Analysis of Personal Bankruptcy and Delinquency," Review of Financial Studies, Society for Financial Studies, vol. 15(1), pages 319-347, March.
  7. Andreas Lehnert & Dean M. Maki, 2002. "Consumption, debt and portfolio choice: testing the effect of bankruptcy law," Finance and Economics Discussion Series 2002-14, Board of Governors of the Federal Reserve System (U.S.).
  8. Coibion, Olivier & Gorodnichenko, Yuriy & Kudlyak, Marianna & Mondragon, John, 2014. "Does Greater Inequality Lead to More Household Borrowing? New Evidence from Household Data," IZA Discussion Papers 7910, Institute for the Study of Labor (IZA).
  9. Wendy Edelberg, 2004. "Testing for adverse selection and moral hazard in consumer loan markets," Finance and Economics Discussion Series 2004-09, Board of Governors of the Federal Reserve System (U.S.).
  10. Athreya, Kartik & Tam, Xuan S. & Young, Eric R., 2009. "Unsecured credit markets are not insurance markets," Journal of Monetary Economics, Elsevier, vol. 56(1), pages 83-103, January.
  11. Ronel Elul & Narayanan Subramanian, 2002. "Forum-Shopping and Personal Bankruptcy," Journal of Financial Services Research, Springer, vol. 21(3), pages 233-255, June.

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