Liquidity Constraints and Consumer Bankruptcy: Evidence from Tax Rebates / Tal Gross, Matthew J. Notowidigdo, Jialan Wang.

Format:

Book

Author/Creator:

Gross, Tal.

Contributor:

National Bureau of Economic Research.

Notowidigdo, Matthew J.

Wang, Jialan.

Series:

Working Paper Series (National Bureau of Economic Research) no. w17807.

NBER working paper series no. w17807

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2012.

Summary:

This paper estimates the extent to which legal fees prevent liquidity-constrained households from declaring bankruptcy. To do so, it studies how the 2001 and 2008 tax rebates affected consumer bankruptcy filings. We exploit the randomized timing of the rebate checks and estimate that the rebates caused a significant, short-run increase in consumer bankruptcies in both years, with larger effects in 2008 when the rebates were more generous and more widely distributed. Using hand-collected data from individual bankruptcy petitions, we document that the rebates caused an increase in the average liabilities and the liabilities-to-income ratios of filers.

Notes:

Print version record

February 2012.