Intergenerational Influences on Personal Bankruptcy: Evidence from Singapore

Abstract

Singapore has one of the strictest debt relief systems worldwide. We merge a large dataset on the residences of adult Singaporean citizens with a bankruptcy dataset to investigate the effect of parental bankruptcy on children’s financial behavior in adulthood. Children whose parents declared bankruptcy during their childhood years (before 17 years of age) are 2-8 percentage points less likely to declare bankruptcy than their older siblings who were over 18 years old during the bankruptcy event. These results contribute to the debate on the leniency of debt relief policies by revealing that strict bankruptcy laws have persistent, potentially intergenerational, effects.

Keywords: Intergenerational Effects, Personal Bankruptcy, Debt Relief Policy

JEL Classification: K35, G51, D10, D18