Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/33518 
Year of Publication: 
2005
Series/Report no.: 
IZA Discussion Papers No. 1805
Publisher: 
Institute for the Study of Labor (IZA), Bonn
Abstract: 
Both personal bankruptcy and redistributive taxes can insure households' consumption risk and both vary considerably across US states. We derive sufficient conditions under which more redistributive taxation makes bankruptcy exemptions less attractive both for the intratemporal insurance and for inter-temporal consumption smoothing. Exploiting data variation over time for 18 US states 1980-2003, we find considerable support for our model's predictions: (i) redistributive taxation and bankruptcy exemptions are negatively correlated; (ii) both policies are associated with more equal consumption growth whereas the effect on unsecured household debt is less clear-cut.
Subjects: 
personal bankruptcy
consumer credit
redistributive taxes and transfers
JEL: 
E21
E61
G18
Document Type: 
Working Paper

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