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- Title
Consumer Bankruptcy: A Fresh Start.
- Authors
LIVSHITS, IGOR; MACGEE, JAMES; TERTILT, MICHÉLE
- Abstract
The article discusses consumer bankruptcy. Consumer bankruptcy provides partial insurance against bad luck, but by increasing interest rates, it makes life-cycle smoothing more difficult. The authors argue that to assess this issue a quantitative model of consumer bankruptcy with three key features is needed. Those features are listed as life-cycle component, idiosyncratic earnings uncertainty, and expense uncertainty. The authors find that transitory and persistent earnings shocks should impact the way bankruptcy is evaluated. They found that the U.S. bankruptcy system may be desirable for reasonable parameter values.
- Subjects
UNITED States; PERSONAL bankruptcy; BANKRUPTCY; BANKRUPTCY claims; WAGES; PROFIT &; loss; POOR debtor's oath; DEBT
- Publication
American Economic Review, 2007, Vol 97, Issue 1, p402
- ISSN
0002-8282
- Publication type
Article
- DOI
10.1257/aer.97.1.402