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Divorce Rates and Bankruptcy Exemption Levels in the United States

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  • Jeffrey Traczynski

Abstract

Although increasing bankruptcy exemption levels protects consumers from negative asset shocks, an unintended consequence of this policy that remains unexplored is the effect on divorce rates. This effect arises from reducing the benefits of marital risk sharing. I establish conditions under which increases in exemption levels lead to more divorce and investigate using data from Vital Statistics of the United States. I estimate that increases in exemption levels occurring between 1989 and 2005 resulted in more than 200,000 additional divorces during this period and that the effect on divorce rates in 2005 is comparable in magnitude to that found for the introduction of unilateral divorce laws by Wolfers.

Suggested Citation

  • Jeffrey Traczynski, 2011. "Divorce Rates and Bankruptcy Exemption Levels in the United States," Journal of Law and Economics, University of Chicago Press, vol. 54(3), pages 751-779.
  • Handle: RePEc:ucp:jlawec:doi:10.1086/661234
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    References listed on IDEAS

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    1. Reint Gropp & John Karl Scholz & Michelle J. White, 1997. "Personal Bankruptcy and Credit Supply and Demand," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 217-251.
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    5. 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 809-830, October.
    6. Leora Friedberg, 1998. "Did Unilateral Divorce Raise Divorce Rates? Evidence from Panel Data," NBER Working Papers 6398, National Bureau of Economic Research, Inc.
    7. Clark, Simon, 1999. "Law, Property, and Marital Dissolution," Economic Journal, Royal Economic Society, vol. 109(454), pages 41-54, March.
    8. Lin, Emily Y. & White, Michelle J., 2001. "Bankruptcy and the Market for Mortgage and Home Improvement Loans," Journal of Urban Economics, Elsevier, vol. 50(1), pages 138-162, July.
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    10. Gary S. Becker, 1981. "A Treatise on the Family," NBER Books, National Bureau of Economic Research, Inc, number beck81-1, January.
    11. Manser, Marilyn & Brown, Murray, 1980. "Marriage and Household Decision-Making: A Bargaining Analysis," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(1), pages 31-44, February.
    12. 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.
    13. Kelly D. Edmiston, 2006. "A new perspective on rising nonbusiness bankruptcy filing rates : analyzing the regional factors," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 55-83.
    14. Niko Matouschek & Imran Rasul, 2008. "The Economics of the Marriage Contract: Theories and Evidence," Journal of Law and Economics, University of Chicago Press, vol. 51(1), pages 59-110, February.
    15. Justin Wolfers, 2006. "Did Unilateral Divorce Laws Raise Divorce Rates? A Reconciliation and New Results," American Economic Review, American Economic Association, pages 1802-1820.
    16. Lucia A. Nixon, 1997. "The Effect of Child Support Enforcement on Marital Dissolution," Journal of Human Resources, University of Wisconsin Press, vol. 32(1), pages 159-181.
    17. McElroy, Marjorie B & Horney, Mary Jean, 1981. "Nash-Bargained Household Decisions: Toward a Generalization of the Theory of Demand," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 22(2), pages 333-349, June.
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    Cited by:

    1. Michelle J. White, 2016. "Economics of Personal Bankruptcy and Insolvency," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 13(4), pages 03-07, 02.
    2. repec:ces:ifodic:v:13:y:2016:i:4:p:19191579 is not listed on IDEAS
    3. repec:ces:ifodic:v:13:y:2016:i:4:p:19189881 is not listed on IDEAS
    4. Corradin, Stefano & Gropp, Reint & Huizinga, Harry & Laeven, Luc, 2016. "The effect of personal bankruptcy exemptions on investment in home equity," Journal of Financial Intermediation, Elsevier, vol. 25(C), pages 77-98.
    5. Jeffrey Traczynski, 2016. "Personal Bankruptcy and Social Insurance," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 13(4), pages 23-27, 02.

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