Personal Bankruptcy: Reconciling Adverse Events and Strategic Filing Hypotheses Using Heterogeneity in Filing Types
AbstractPersonal bankruptcies have continued to rise even after passage of a comprehensive reform designed to curb strategic use of bankruptcy. We formalize a distinction between strategic filing and adverse events filing by testing whether consumers manipulate their debt and filing decision or not. Test results are consistent with the adverse events hypothesis and are replicated using both PSID and SCF data. Extending the analysis to allow for both types, there is evidence of heterogeneity in filing types, consistent with both hypotheses. On average, approximately 16 percent of households are more likely to behave as strategic types and 84 percent as adverse events types.
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Bibliographic InfoPaper provided by University of Kansas, Department of Economics in its series WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS with number 201239.
Length: 42 pages
Date of creation: Oct 2012
Date of revision: Oct 2012
Consumer bankruptcy; personal bankruptcy; adverse events; strategic filing;
Other versions of this item:
- Li Gan & Tarun Sabarwal & Shuoxun Zhang, 2010. "Personal Bankruptcy: Reconciling Adverse Events and Strategic Timing Hypotheses Using Heterogeneity in Filing Types," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 201008, University of Kansas, Department of Economics, revised May 2011.
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-10-20 (All new papers)
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