Legal Rules and Bankruptcy Rates: Historical Evidence from the States

Mary Hansen () and Bradley Hansen
Additional contact information
Mary Hansen: Department of Economics, American University
Bradley Hansen: Department of Economics, University of Mary Washington

No 2006-16, Working Papers from American University, Department of Economics

Abstract: Since the early twentieth century, observers have attributed the wide variation in state bankruptcy rates to variation in state legal rules such as garnishment and bankruptcy exemptions. Recent econometric analyses, however, conclude that legal rules do not matter. We explore the impact of legal rules on bankruptcy rates using a new technique—fixed effects vector decomposition—to exploit historical variation in legal rules. The technique allows us to estimate the impact of timeinvariant legal rules in a fixed effects framework. We find that the variation in state legal rules explains much of the variation in state wage earner bankruptcy rates for 1926 to 1932.

Keywords: Bankruptcy; fixed effects vector decomposition; law and economics (search for similar items in EconPapers)
JEL-codes: K4 N4 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2006-12
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.17606/z9zk-dg41 First version, 2006 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:amu:wpaper:1606

Access Statistics for this paper

More papers in Working Papers from American University, Department of Economics
Bibliographic data for series maintained by Thomas Meal ().