NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Liquidity Constraints and Consumer Bankruptcy: Evidence from Tax Rebates

Tal Gross, Matthew J. Notowidigdo, Jialan Wang

NBER Working Paper No. 17807
Issued in February 2012
NBER Program(s):   PE

This paper estimates the extent to which legal fees prevent liquidity-constrained households from declaring bankruptcy. To do so, it studies how the 2001 and 2008 tax rebates affected consumer bankruptcy filings. We exploit the randomized timing of the rebate checks and estimate that the rebates caused a significant, short-run increase in consumer bankruptcies in both years, with larger effects in 2008 when the rebates were more generous and more widely distributed. Using hand-collected data from individual bankruptcy petitions, we document that the rebates caused an increase in the average liabilities and the liabilities-to-income ratios of filers.

A non-technical summary of this paper is available in the June 2012 NBER digest.  You can sign up to receive the NBER Digest by email.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Information about Free Papers

You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w17807

Published: “Liquidity Constraints and Consumer Bankruptcy: Evidence from Tax Rebates,” with Matthew Notowidigdo and Jialan Wang. Review of Economics and Statistics, accepted. Manuscript. Appendix. Featured in the June 2012 NBER Digest Media Coverage: Los Angeles Times; Huffington Post; Vox; Forbes; CNN. Older Version: NBER Working Paper #17807

Users who downloaded this paper also downloaded these:
Mian and Sufi w17830 What explains high unemployment? The aggregate demand channel
Hummels and Schaur w17758 Time as a Trade Barrier
Borjas and Doran w17800 The Collapse of the Soviet Union and the Productivity of American Mathematicians
Cascio and Washington w17776 Valuing the Vote: The Redistribution of Voting Rights and State Funds Following the Voting Rights Act of 1965
Kruse, Blasi, and Freeman w17745 Does Linking Worker Pay to Firm Performance Help the Best Firms Do Even Better?
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us