Personal Bankruptcy and Credit Supply and Demand

QUARTERLY JOURNAL OF ECONOMICS

Posted: 15 Oct 1996

See all articles by Reint Gropp

Reint Gropp

Halle Institute for Economic Research

John Karl Scholz

University of Wisconsin - Madison - Department of Economics; National Bureau of Economic Research (NBER)

Michelle J. White

University of California, San Diego (UCSD) - Department of Economics; National Bureau of Economic Research (NBER)

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Abstract

This paper examines how personal bankruptcy and bankruptcy exemptions affect the supply and demand for credit. While generous state-level bankruptcy exemptions are probably viewed by most policy makers as benefiting less-well-off borrowers, our results using data from the 1983 Survey of Consumer Finances suggest they increase the amount of credit held by high-asset households and reduce the availability and amount of credit to low-asset households, conditioning on observable characteristics. We also find evidence that interest rates on automobile loans for low- asset households are higher in high exemption states. Thus, bankruptcy exemptions redistribute credit toward borrowers with high assets.

JEL Classification: G18, G21, G28

Suggested Citation

Gropp, Reint and Scholz, John Karl and White, Michelle J., Personal Bankruptcy and Credit Supply and Demand. QUARTERLY JOURNAL OF ECONOMICS, Available at SSRN: https://ssrn.com/abstract=3531

Reint Gropp

Halle Institute for Economic Research ( email )

P.O. Box 11 03 61
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John Karl Scholz (Contact Author)

University of Wisconsin - Madison - Department of Economics ( email )

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Madison, WI 53706
United States
608-262-5380 (Phone)
608-262-2033 (Fax)

National Bureau of Economic Research (NBER) ( email )

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Michelle J. White

University of California, San Diego (UCSD) - Department of Economics ( email )

9500 Gilman Drive
La Jolla, CA 92093-0508
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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