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Consumer bankruptcy and default: The role of individual social capital


  • Agarwal, Sumit
  • Chomsisengphet, Souphala
  • Liu, Chunlin


In this paper, we empirically assess the role of individual social capital on personal bankruptcy and default outcomes in the consumer credit market. After controlling for a borrower's risk score, debt, income, wealth, and legal and economic environments, we find that default/bankruptcy risk rises and then falls over the lifecycle, while a borrower who owns a home or is married has a lower risk of default/bankruptcy. Moreover, a borrower who migrates 190Â miles from his "state of birth" is 17% more likely to default and 15% more likely to file for bankruptcy, while a borrower who continues to live in his state of birth is 14% and 10% less likely to default and file for bankruptcy, respectively. A borrower who moves to a rural area is 9% and 7% less likely to default and declare bankruptcy, respectively. We also find that measures of social networks, norms, and cooperation and trust (i.e., aggregate social capital) are inversely related to consumer bankruptcy.

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  • Agarwal, Sumit & Chomsisengphet, Souphala & Liu, Chunlin, 2011. "Consumer bankruptcy and default: The role of individual social capital," Journal of Economic Psychology, Elsevier, vol. 32(4), pages 632-650, August.
  • Handle: RePEc:eee:joepsy:v:32:y:2011:i:4:p:632-650

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    References listed on IDEAS

    1. Sumit Agarwal & John C. Driscoll & Xavier Gabaix & David Laibson, 2007. "The Age of Reason: Financial Decisions Over the Lifecycle," NBER Working Papers 13191, National Bureau of Economic Research, Inc.
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    1. repec:bla:jconsa:v:51:y:2017:i:2:p:380-405 is not listed on IDEAS
    2. Meng-Na Xu & Ming-Lin Wang, 2015. "Individual perception of accessible social capital and attitude to thrift," Review of Economics of the Household, Springer, vol. 13(3), pages 487-500, September.
    3. Jonathan Fisher, 2017. "Who Files for Personal Bankruptcy in the United States?," Working Papers 17-54, Center for Economic Studies, U.S. Census Bureau.
    4. Sarah Brown & Pulak Ghosh & Karl Taylor, 2016. "Household Finances and Social Interaction: Bayesian Analysis of Household Panel Data," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 62(3), pages 467-488, September.
    5. Weigert, Florian, 2013. "Crash Aversion and the Cross-Section of Expected Stock Returns Worldwide," Working Papers on Finance 1325, University of St. Gallen, School of Finance, revised Nov 2015.
    6. repec:spr:soinre:v:132:y:2017:i:2:d:10.1007_s11205-016-1299-0 is not listed on IDEAS
    7. repec:bap:journl:170404 is not listed on IDEAS
    8. Sarah Brown & Karl Taylor, 2012. "Household Finances and Social Interaction," Working Papers 2012007, The University of Sheffield, Department of Economics.
    9. repec:spr:jhappi:v:18:y:2017:i:3:d:10.1007_s10902-016-9753-x is not listed on IDEAS
    10. Atte Oksanen & Mikko Aaltonen & Kati Rantala, 2015. "Social Determinants of Debt Problems in a Nordic Welfare State: a Finnish Register-Based Study," Journal of Consumer Policy, Springer, vol. 38(3), pages 229-246, September.


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