Bankruptcy Rates Among NFL Players with Short-Lived Income Spikes

12 Pages Posted: 26 Aug 2015

See all articles by Kyle Carlson

Kyle Carlson

California Institute of Technology - Division of the Humanities and Social Sciences

Joshua Kim

University of Washington

Annamaria Lusardi

George Washington University - Department of Accountancy; National Bureau of Economic Research (NBER)

Colin Camerer

California Institute of Technology - Division of the Humanities and Social Sciences

Multiple version iconThere are 2 versions of this paper

Date Written: April 2, 2015

Abstract

One of the central predictions of the life-cycle hypothesis is that individuals smooth consumption over their economic life cycle; thus, they save when income is high, in order to provide for when income is likely to be low, such as after retirement. We test this prediction in a group of people — players in the National Football League (NFL) — whose income profile does not just gradually rise then fall, as it does for most workers, but rather has a very large spike lasting only a few years. We collected data on all players drafted by NFL teams from 1996 to 2003. Given the difficulty of directly measuring consumption of NFL players, we test whether they have adequate savings by counting how many retired NFL players file for bankruptcy. Contrary to the life-cycle model predictions, we find that initial bankruptcy filings begin very soon after retirement and continue at a substantial rate through at least the first 12 years of retirement. Moreover, bankruptcy rates are not affected by a player’s total earnings or career length. Having played for a long time and been well-paid does not provide much protection against the risk of going bankrupt.

Keywords: financial literacy, bankruptcy, NFL

JEL Classification: D31, D91

Suggested Citation

Carlson, Kyle and Kim, Joshua and Lusardi, Annamaria and Camerer, Colin F., Bankruptcy Rates Among NFL Players with Short-Lived Income Spikes (April 2, 2015). Available at SSRN: https://ssrn.com/abstract=2650443 or http://dx.doi.org/10.2139/ssrn.2650443

Kyle Carlson

California Institute of Technology - Division of the Humanities and Social Sciences ( email )

1200 East California Blvd.
Pasadena, CA 91125
United States

Joshua Kim

University of Washington ( email )

Seattle, WA 98195
United States

Annamaria Lusardi (Contact Author)

George Washington University - Department of Accountancy ( email )

George Washington University School of Business
Washington, DC 20052
United States

HOME PAGE: http://business.gwu.edu/profiles/annamaria-lusardi/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Colin F. Camerer

California Institute of Technology - Division of the Humanities and Social Sciences ( email )

1200 East California Blvd.
Pasadena, CA 91125
United States
626-395-4054 (Phone)
626-432-1726 (Fax)

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