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Wege aus der Verschuldung: Reform der Lohnpfändung / Getting Out of Debt: Reforming the Garnishment of Wage

Listed author(s):
  • Zaborowski Christoph

    ()

    (Sandstraße 6, CH-8003 Zürich)

  • Zweifel Peter

    ()

    (Sozialökonomisches Institut der Universität Zürich, Hottingerstraße 10, CH-8032 Zürich)

Registered author(s):

    Garnishment of wage as a way for creditors to enforce payment by unwilling or insolvent debtors, while very common in Germany and Switzerland, is not very successful. Based on a dynamic model of debtor behaviour, this paper explores two alternatives of reform. One is to reduce the rate of garnishment, which at present amounts to 100 percent of the wage income exceeding a defined subsistence level, thus probably destroying incentives to work. According to model simulations, reducing the rate of garnishment is likely to result in an increase of labour supply but a decrease of garnishment revenue per period. Second, the introduction of a debt release as it exists in the United States would have an ambiguous effect on labour supply. While providing debtorswith a fresh start, it would results a partial loss for creditors. A Pareto improvement thus does not seem to be possible. When taxpayers as an involved third party are taken into account, however, a potential Pareto improvement appears not attainable through debt release.

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    File URL: https://www.degruyter.com/view/j/jbnst.2002.222.issue-2/jbnst-2002-0206/jbnst-2002-0206.xml?format=INT
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    Article provided by De Gruyter in its journal Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik).

    Volume (Year): 222 (2002)
    Issue (Month): 2 (April)
    Pages: 258-279

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    Handle: RePEc:jns:jbstat:v:222:y:2002:i:2:p:258-279
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    1. Das-Gupta, Arindam & Mookherjee, Dilip, 1996. "Tax Amnesties as Asset-Laundering Devices," Journal of Law, Economics and Organization, Oxford University Press, vol. 12(2), pages 408-431, October.
    2. Dutta, Prajit K., 1994. "Bankruptcy and expected utility maximization," Journal of Economic Dynamics and Control, Elsevier, vol. 18(3-4), pages 539-560.
    3. Andreoni, James, 1991. "The desirability of a permanent tax amnesty," Journal of Public Economics, Elsevier, vol. 45(2), pages 143-159, July.
    4. Reint Gropp & John Karl Scholz & Michelle White, 1996. "Personal Bankruptcy and Credit Supply and Demand," NBER Working Papers 5653, National Bureau of Economic Research, Inc.
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