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How employment insurance recipients make decision about insolvency?

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  • Predelus, Wilner
  • Amine, Samir

Abstract

Beyond the maximum insurable income, the size of the shortfall increases with the worker's income, leaving unemployed workers with little or no room to maintain a decent life while meeting all their other obligations. This situation is even more perilous in an indebted society where the debt per income ratio hovers at around 175%. This paper contributes to the literature by identifying the key socioeconomic and demographic indicators that dictate the insolvency choice (bankruptcy or consumer proposal) of Canadian insolvent employment insurance recipients. Using Canadian data, we show that low employment insurance leads debtors to eat up their asset and incur more debt, which ultimately make bankruptcy more appealing to them than proposal.

Suggested Citation

  • Predelus, Wilner & Amine, Samir, 2020. "How employment insurance recipients make decision about insolvency?," Research in Economics, Elsevier, vol. 74(4), pages 344-348.
    • Handle: RePEc:eee:reecon:v:74:y:2020:i:4:p:344-348
    DOI: 10.1016/j.rie.2020.10.004
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    References listed on IDEAS

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    1. Domowitz, Ian & Eovaldi, Thomas L, 1993. "The Impact of the Bankruptcy Reform Act of 1978 on Consumer Bankruptcy," Journal of Law and Economics, University of Chicago Press, vol. 36(2), pages 803-835, October.
    2. Samir Amine & Wilner Predelus, 2019. "The Persistence of the 2008-2009 Recession and Insolvency Filings in Canada," Economics Bulletin, AccessEcon, vol. 39(1), pages 84-93.
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    4. Kartik B. Athreya, 2003. "Unemployment insurance and personal bankruptcy," Economic Quarterly, Federal Reserve Bank of Richmond, vol. 89(Spr), pages 33-53.
    5. Scott Fay & Erik Hurst & Michelle J. White, 2002. "The Household Bankruptcy Decision," American Economic Review, American Economic Association, vol. 92(3), pages 706-718, June.
    6. Jonathan D. Fisher, 2005. "The Effect Of Unemployment Benefits, Welfare Benefits, And Other Income On Personal Bankruptcy," Contemporary Economic Policy, Western Economic Association International, vol. 23(4), pages 483-492, October.
    7. Wayne Vroman & Stephen A. Woodbury, 2014. "Financing Unemployment Insurance," National Tax Journal, National Tax Association;National Tax Journal, vol. 67(1), pages 253-268, March.
    8. Buckley, F H & Brinig, Margaret F, 1998. "The Bankruptcy Puzzle," The Journal of Legal Studies, University of Chicago Press, vol. 27(1), pages 187-207, January.
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    Cited by:

    1. Samir AMINE & Wilner PREDELUS, 2023. "Financial difficulties and economic recession: Evidence from Canadian seniors," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(1(634), S), pages 227-238, Spring.

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    More about this item

    Keywords

    Insolvency; Bankruptcy; Proposal; Employment insurance; Choice; Canada;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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