Accounting for the Rise in Consumer Bankruptcies

Igor D. Livshits (), James MacGee () and Michele Tertilt ()

American Economic Journal: Macroeconomics, 2010, vol. 2, issue 2, pages 165-93

Abstract: Personal bankruptcies in the United States have increased dramatically, rising from 1.4 per thousand working age adults in 1970 to 8.5 in 2002. We use a heterogeneous agent life-cycle model with competitive lenders to evaluate several commonly offered explanations. We find that increased uncertainty (income shocks, expense uncertainty) cannot account quantitatively for the rise in bankruptcies. Instead, the rise in filings appears mainly to reflect changes in the credit market environment: a decrease in the transaction cost of lending and in the cost of bankruptcy. We also argue that the abolition of usury laws and other legal changes were unimportant. (JEL D14, E44, G21, G28)

JEL-codes: D14 E44 G21 G28 (search for similar items in EconPapers)
Date: 2010
Note: DOI: 10.1257/mac.2.2.165
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Related works:
Working Paper: Accounting for the Rise in Consumer Bankruptcies (2007)
Working Paper: Accounting for the Rise in Consumer Bankruptcies (2006)
Working Paper: Accounting for the Rise in Consumer Bankruptcies (2006)
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