Wege aus der Verschuldung: Reform der Lohnpfändung / Getting Out of Debt: Reforming the Garnishment of Wage

Zaborowski Christoph () and Zweifel Peter ()
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Zaborowski Christoph: Sandstraße 6, CH-8003 Zürich
Zweifel Peter: Sozialökonomisches Institut der Universität Zürich, Hottingerstraße 10, CH-8032 Zürich

Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), 2002, vol. 222, issue 2, 258-279

Abstract: Garnishment of wage as a way for creditors to enforce payment by unwilling or insolvent debtors, while very common in Germany and Switzerland, is not very successful. Based on a dynamic model of debtor behaviour, this paper explores two alternatives of reform. One is to reduce the rate of garnishment, which at present amounts to 100 percent of the wage income exceeding a defined subsistence level, thus probably destroying incentives to work. According to model simulations, reducing the rate of garnishment is likely to result in an increase of labour supply but a decrease of garnishment revenue per period. Second, the introduction of a debt release as it exists in the United States would have an ambiguous effect on labour supply. While providing debtorswith a fresh start, it would results a partial loss for creditors. A Pareto improvement thus does not seem to be possible. When taxpayers as an involved third party are taken into account, however, a potential Pareto improvement appears not attainable through debt release.

Keywords: Indebtness; reforming the garnishment of wage; flexible subsistence level; debt release; Überschuldung; Reform der Lohnpfändung; flexibles Existenzminimum; vorzeitige Entschuldung; Indebtness; reforming the garnishment of wage; flexible subsistence level; debt release (search for similar items in EconPapers)
Date: 2002
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Persistent link: https://EconPapers.repec.org/RePEc:jns:jbstat:v:222:y:2002:i:2:p:258-279

DOI: 10.1515/jbnst-2002-0206

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