TY  - JOUR
AU  - Livshits,Igor
AU  - MacGee,James
AU  - Tertilt,Michèle
TI  - Accounting for the Rise in Consumer Bankruptcies
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13363
PY  - 2007
Y2  - September 2007
UR  - http://www.nber.org/papers/w13363
L1  - http://www.nber.org/papers/w13363.pdf
N1  - Author contact info:
Igor Livshits
Department of Economics
University of Western Ontario
Social Science Centre
London, Ontario N6A5C2
Tel: 519/661-2111 X85539
Fax: 519/661-3666
E-Mail: livshits@uwo.ca

James MacGee
Department of Economics
University of Western Ontario
London, Ontario Canada NCA 5C2
Tel: 519/661-2111 Ext 85207
Fax: 519/661-3666
E-Mail: jmacgee@uwo.ca

Michèle Tertilt
Department of Economics
University of Mannheim
L7, 3-5
68131 Mannheim
Germany
Tel: +49-621-181-1902
E-Mail: tertilt@uni-mannheim.de
AB  - Personal bankruptcies  in the United States have increased dramatically, rising from 1.4 per thousand working age population in 1970 to 8.5 in 2002. We use a heterogeneous agent life-cycle model with competitive financial intermediaries who can observe households' earnings, age and current asset holdings to evaluate several commonly offered explanations. We find that increased uncertainty (income shocks, expense uncertainty) cannot quantitatively account for the rise in bankruptcies. Instead, the rise in filings appears to mainly reflect changes in the credit market environment. We find that credit market innovations which cause a decrease in the transactions cost of lending and a decline in the cost of bankruptcy can largely accounting for the rise in consumer bankruptcy. We also argue that the abolition of usury laws and other legal changes are unimportant.
ER  -