The economics of personal bankruptcy
Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2004.
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| Format: | Thesis |
| Language: | eng |
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Massachusetts Institute of Technology
2005
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| Online Access: | http://hdl.handle.net/1721.1/29428 |
| _version_ | 1826194657520910336 |
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| author | Link, Frederick, 1975- |
| author2 | Peter Diamond and Jonathan Gruber. |
| author_facet | Peter Diamond and Jonathan Gruber. Link, Frederick, 1975- |
| author_sort | Link, Frederick, 1975- |
| collection | MIT |
| description | Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2004. |
| first_indexed | 2024-09-23T09:59:30Z |
| format | Thesis |
| id | mit-1721.1/29428 |
| institution | Massachusetts Institute of Technology |
| language | eng |
| last_indexed | 2024-09-23T09:59:30Z |
| publishDate | 2005 |
| publisher | Massachusetts Institute of Technology |
| record_format | dspace |
| spelling | mit-1721.1/294282019-04-12T09:11:46Z The economics of personal bankruptcy Link, Frederick, 1975- Peter Diamond and Jonathan Gruber. Massachusetts Institute of Technology. Dept. of Economics. Massachusetts Institute of Technology. Dept. of Economics. Economics. Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2004. Includes bibliographical references (p. 183). This thesis examines the effect of bankruptcy law on consumer borrowing and welfare. The thesis consists of four theoretical chapters and two empirical chapters. Chapter 1 presents a simple model of consumer borrowing where the repayment of debt is governed by a bankruptcy law which allows a consumer to protect income below a given exemption level from creditors. Increasing bankruptcy exemption levels are found to increase borrowing and to increase consumer welfare so long as the consumer is borrowing less than the maximum amount possible. If consumers are borrowing the maximum amount possible, increasing exemption amounts increases credit constraints and decreases borrowing. Consumer welfare is maximized at the point where the marginal benefit the amount of insurance provided by the bankruptcy regime equals the marginal cost to reducing borrowing. Chapter 2 expands the model described in chapter 1 to include consumers who differ as to either their demand for credit or their ability to repay loans. The optimal exemption level is found to occur where the marginal cost due to increasing credit constraints to consumers with a higher demand for credit or a lower ability to repay is balanced against the increased insurance benefit provided to other borrowers. (cont.) Chapter 3 considers the effect of bankruptcy law on credit markets with asymmetric information. I find that the possibility to receive a discharge of debt provided by bankruptcy law may cause consumers to distort their borrowing choices. Optimal exemption levels balance costs due to distortions in borrowing with benefits associated with increases in insurance. Chapter 4 presents a model of the effect of bankruptcy law on incentives to work. I find that increasing exemption levels may either increase or decrease incentives to work or to take risk. Chapter 5 examines the effect of exemption levels on household borrowing. I find that increasing personal property exemption levels are associated with higher levels of home mortgage debt and decreased probabilities that non-homeowners have greater than $50,000 in debt. Homestead exemptions are negatively associated with homeownership. Chapter 6 finds that personal property exemption levels are positively related to bankruptcy filing rates. by Frederick Link. Ph.D. 2005-10-14T20:29:57Z 2005-10-14T20:29:57Z 2004 2004 Thesis http://hdl.handle.net/1721.1/29428 56140648 eng M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission. http://dspace.mit.edu/handle/1721.1/7582 183 p. 6888475 bytes 6888281 bytes application/pdf application/pdf application/pdf Massachusetts Institute of Technology |
| spellingShingle | Economics. Link, Frederick, 1975- The economics of personal bankruptcy |
| title | The economics of personal bankruptcy |
| title_full | The economics of personal bankruptcy |
| title_fullStr | The economics of personal bankruptcy |
| title_full_unstemmed | The economics of personal bankruptcy |
| title_short | The economics of personal bankruptcy |
| title_sort | economics of personal bankruptcy |
| topic | Economics. |
| url | http://hdl.handle.net/1721.1/29428 |
| work_keys_str_mv | AT linkfrederick1975 theeconomicsofpersonalbankruptcy AT linkfrederick1975 economicsofpersonalbankruptcy |