Consumer bankruptcy has increased more than 4-fold since 1980. Livshits, MacGee, and Tertilt (2006) show that a decline in the social stigma of bankruptcy together with a decline in the transactions cost of borrowing can account for both increased filings and increased unsecured borrowing by...

Personal bankruptcy filings have increased dramatically: rising from 1.4 in per thousand of working age population 1970 to 8.5 in 2002 in the United States and from 0.2 in 1970 to 4.3 in 2002 in Canada. This paper asks whether 6 commonly mentioned potential explanations -- financial innovation,...

Personal bankruptcies in the United States have increased dramatically, rising from 1.4 per thousand working age population in 1970 to 8.5 in 2002. We use a heterogeneous agent life-cycle model with competitive financial intermediaries who can observe households' earnings, age and current asset...

There has been considerable public debate on the relative merits of alternative consumer bankruptcy rules. The option to discharge one’s debt provides partial insurance against bad luck, but by driving up interest rates makes lifecycle smoothing more difficult. We construct a quantitative...

Financial innovations are a common explanation of the rise in consumer credit and bankruptcies. To evaluate this story, we develop a simple model that incorporates two key frictions: asymmetric information about borrowers' risk of default and a fixed cost to create each contract offered by...

ex-ante appropriate (good) institutions may appear to be bad ex-post as they make economies vulnerable to shocks such as turbulence. As an example, the firing restrictions in Europe and Japan, which appear to be an inefficient institution ex-post, may have been a part of an efficient arrangement...

There are large countercyclical fluctuations in U.S. bankruptcy filings and real credit card interest rates, while unsecured credit is pro-cyclical. This paper documents the facts and asks whether the predictions of incomplete market models with bankruptcy are consistent with these facts. We...

We propose a simple model with adverse selection where delinquency, renegotiation, and bankruptcy all occur in equilibrium as a result of a simple screening mechanism. A borrower has private information about her cost of bankruptcy, and a lender may use random contracts to screen different types...

Several recent defaults on sovereign debt were accompanied by major banking crises in the defaulting countries. I argue that the banking crises, triggered by the defaults, were due to inadequate prudential regulations, which did not recognize the riskiness of the government debt. I use a simple...