Debt Portfolios and Homestead Exemptions

Thomas Hintermaier and Winfried Koeniger

American Economic Journal: Macroeconomics, 2016, vol. 8, issue 4, 103-41

Abstract: This paper investigates the economic relevance of the large differences in homestead exemptions across US states. We build a structural model for an equilibrium analysis of debt-portfolio choices over the life cycle. Our analysis captures key patterns from the observed cross-sectional distributions of secured debt, unsecured debt, and of home equity. The model predicts that harmonizing the amount of home equity exempt in bankruptcy procedures has quantitatively negligible effects on the interest rate of unsecured debt and on welfare, unless the exemption is eliminated. The small welfare effect may rationalize why the differences in homestead exemptions are so persistent.

JEL-codes: D14 D91 E21 G11 H71 R31 (search for similar items in EconPapers)
Date: 2016
Note: DOI: 10.1257/mac.20120151
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Citations: View citations in EconPapers (11)

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Related works:
Working Paper: Debt Portfolios (2011)
Working Paper: Debt Portfolios (2011)
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