An Empirical Analysis of Personal Bankruptcy and Delinquency

David B. Gross and Nicholas Souleles

No 8409, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper uses a new panel data set of credit card accounts to analyze credit card delinquency, personal bankruptcy, and the stability of credit risk models. We estimate duration models for default and assess the relative importance of different variables in predicting default. We investigate how the propensity to default has changed over time, disentangling the two leading explanations for the recent increase in default rates - a deterioration in the risk - composition of borrowers versus an increase in borrowers' willingness to default due to declines in default costs, including social, information, and legal costs. Even after controlling for risk-composition and other economic fundamentals, the propensity to default significantly increased between 1995 and 1997. By contrast, increases in credit limits and other changes in risk-composition explain only a small part of the change in default rates. Standard default models appear to have missed an important time-varying default factor, consistent with a decline in default costs.

JEL-codes: E21 E51 (search for similar items in EconPapers)
Date: 2001-08
Note: EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Published as Gross, D. B. and N. S. Souleles. "An Empirical Analysis Of Personal Bankruptcy And Delinquency," Review of Financial Studies, 2002, v15(1,Mar), 319-347.

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Related works:
Journal Article: An Empirical Analysis of Personal Bankruptcy and Delinquency (2002)
Working Paper: An Empirical Analysis of Personal Bankruptcy and Delinquency (1999)
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