Debt Portfolios

53 Pages Posted: 4 May 2011

See all articles by Thomas Hintermaier

Thomas Hintermaier

University of Bonn

Winfried Koeniger

University of St. Gallen; CESifo (Center for Economic Studies and Ifo Institute); Center for Financial Studies (CFS); IZA Institute of Labor Economics; Swiss Finance Institute

Date Written: April 2011

Abstract

We provide a model with endogenous portfolios of secured and unsecured household debt. Secured debt is collateralized by owner-occupied housing whereas unsecured debt can be discharged according to bankruptcy regulations. We show that the calibrated model matches important quantitative characteristics of observed wealth and debt portfolios for prime-age consumers in the U.S. We then establish the quantitative result that home equity does not serve as informal collateral for unsecured debt since, as in the data, unsecured debtors hold small amounts of home equity in equilibrium. Thus, observed variations in homestead exemptions, which are an important part of U.S. bankruptcy regulation, have a small effect on the quantity and price of unsecured debt.

Keywords: bankruptcy, collateral, commitment, household debt portfolios, housing, income risk

JEL Classification: D91, E21

Suggested Citation

Hintermaier, Thomas and Koeniger, Winfried, Debt Portfolios (April 2011). CEPR Discussion Paper No. DP8359, Available at SSRN: https://ssrn.com/abstract=1830977

Thomas Hintermaier (Contact Author)

University of Bonn ( email )

Regina-Pacis-Weg 3
Postfach 2220
Bonn, D-53012
Germany

Winfried Koeniger

University of St. Gallen ( email )

Swiss Institute for Empirical Economic Research
Varnb├╝elstr. 14
St.Gallen, CH-9000
Switzerland

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Center for Financial Studies (CFS) ( email )

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Frankfurt am Main, 60323
Germany

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Schaumburg-Lippe Str. 7/9
D-53072 Bonn
Germany

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

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