Redistributive Taxation and Personal Bankruptcy in US States

Charles Grant () and Winfried Koeniger
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Charles Grant: University of Reading

No 1805, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Both personal bankruptcy and redistributive taxes can insure households' consumption risk and both vary considerably across US states. We derive sufficient conditions under which more redistributive taxation makes bankruptcy exemptions less attractive both for the intratemporal insurance and for inter-temporal consumption smoothing. Exploiting data variation over time for 18 US states 1980-2003, we find considerable support for our model's predictions: (i) redistributive taxation and bankruptcy exemptions are negatively correlated; (ii) both policies are associated with more equal consumption growth whereas the effect on unsecured household debt is less clear-cut.

Keywords: consumer credit; redistributive taxes and transfers; personal bankruptcy (search for similar items in EconPapers)
JEL-codes: E21 E61 G18 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2005-10
New Economics Papers: this item is included in nep-fin, nep-mac and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published - revised version published in: Journal of Law and Economics, 2009, 52 (3), 445-467

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Related works:
Journal Article: Redistributive Taxation and Personal Bankruptcy in U.S. States (2009)
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