Consumer Bankruptcy, Mortgage Default and Labor Supply

Wenli Li, Costas Meghir () and Florian Oswald
Additional contact information
Wenli Li: Federal Reserve Bank of Philadelphia
Costas Meghir: Cowles Foundation, Yale University, NBER, IZA, CEPR and IFS, https://economics.yale.edu/people/faculty/costas-meghir

No 2327, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We specify and estimate a lifecycle model of consumption, housing demand and labor supply in an environment where individuals may file for bankruptcy or default on their mortgage. Uncertainty in the model is driven by house price shocks, education specific productivity shocks, and catastrophic consumption events, while bankruptcy is governed by the basic institutional framework in the US as implied by Chapter 7 and Chapter 13. The model is estimated using micro data on credit reports and mortgages combined with data from the American Community Survey. We use the model to understand the relative importance of the two chapters (7 and 13) for each of our two education groups that differ in both preferences and wage profiles. We also provide an evaluation of the BAPCPA reform. Our paper demonstrates importance of distributional effects of Bankruptcy policy.

Keywords: Lifecycle; Bankruptcy; Housing; Mortgage Default; Labor Supply; Consumption; Education; Insurance; Moral hazard (search for similar items in EconPapers)
JEL-codes: D14 D18 D52 D53 E21 G33 J22 J31 K35 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2022-03
New Economics Papers: this item is included in nep-ban, nep-dge, nep-ias, nep-law, nep-lma, nep-ltv, nep-mac and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Consumer Bankruptcy, Mortgage Default and Labor Supply (2022)
Working Paper: Consumer Bankruptcy, Mortgage Default and Labor Supply (2022)
Working Paper: Consumer Bankrupcty, Mortgage Default and Labor Supply (2022)
Working Paper: Consumer Bankruptcy, Mortgage Default and Labor Supply (2022)
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