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Redistributive Taxation and Personal Bankruptcy in U.S. States

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  • Charles Grant
  • Winfried Koeniger

Abstract

Personal bankruptcy regulation and redistributive taxes and transfers vary considerably across U.S. states and over time. Our hypothesis is that both policies are imperfect substitutes in insuring consumption of risk-averse agents in incomplete markets. Exploiting data variation over time for 18 U.S. states for the period 1980-2003, we find considerable support for this hypothesis: redistributive taxation and bankruptcy exemptions are negatively correlated, and both policies are associated with more equal consumption growth. (c) 2009 by The University of Chicago. All rights reserved.

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  • Charles Grant & Winfried Koeniger, 2009. "Redistributive Taxation and Personal Bankruptcy in U.S. States," Journal of Law and Economics, University of Chicago Press, vol. 52(3), pages 445-467, August.
    • Handle: RePEc:ucp:jlawec:v:52:y:2009:i:3:p:445-467
    DOI: 10.1086/591477
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    Cited by:

    1. Burcu Duygan-Bump & Charles Grant, 2008. "Household debt repayment behaviour: what role do institutions play?," Supervisory Research and Analysis Working Papers QAU08-3, Federal Reserve Bank of Boston.
    2. Thomas Hintermaier & Winfried Koeniger, 2016. "Debt Portfolios and Homestead Exemptions," American Economic Journal: Macroeconomics, American Economic Association, vol. 8(4), pages 103-141, October.
    3. Corradin, Stefano & Gropp, Reint & Huizinga, Harry & Laeven, Luc, 2016. "The effect of personal bankruptcy exemptions on investment in home equity," Journal of Financial Intermediation, Elsevier, vol. 25(C), pages 77-98.
    4. Rigmar Osterkamp, 2006. "Insolvency in selected OECD countries: Outcomes and regulations," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 4(1), pages 27-33, 04.
    5. Thomas Hintermaier & Winfried Koeniger, 2009. "Debt Portfolios," Working Papers 646, Queen Mary University of London, School of Economics and Finance.
    6. Benjamin B Boozer & S. Keith Lowe & Robert J. Landry III, 2014. "Personal Financial Decisions: A Study of Changes in Homestead Exemption Levels and Consumer Bankruptcy Choices," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 8(4), pages 17-26.
    7. Michelle J. White, 2008. "Bankruptcy: Past Puzzles, Recent Reforms, and the Mortgage Crisis," NBER Working Papers 14549, National Bureau of Economic Research, Inc.
    8. Bertola, Giuseppe & Koeniger, Winfried, 2007. "Consumption smoothing and income redistribution," European Economic Review, Elsevier, vol. 51(8), pages 1941-1958, November.
    9. Bertola, Giuseppe & Koeniger, Winfried, 2006. "Consumption smoothing and liquidity income redistribution," CFS Working Paper Series 2006/34, Center for Financial Studies (CFS).
    10. Giuseppe Bertola & Stefan Hochguertel, 2007. "Household Debt and Credit: Economic Issues and Data Problems," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 36(2), pages 115-146, July.
    11. Rigmar Osterkamp, 2006. "Insolvenzen in ausgewählten OECD-Ländern - Umfang, Tendenzen, Gesetze," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 59(09), pages 22-29, May.

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    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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