TY - JOUR
T1 - Liquidity constraints and consumer bankruptcy
T2 - Evidence from tax rebates
AU - Gross, Tal
AU - Notowidigdo, Matthew J.
AU - Wang, Jialan
N1 - Publisher Copyright:
© 2014 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
PY - 2014/7/1
Y1 - 2014/7/1
N2 - We estimate the extent to which legal and administrative fees prevent liquidity-constrained households from declaring bankruptcy. To do so, we study 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 households that filed shortly after receiving their rebate checks had higher average liabilities and liabilities-to-income ratios.
AB - We estimate the extent to which legal and administrative fees prevent liquidity-constrained households from declaring bankruptcy. To do so, we study 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 households that filed shortly after receiving their rebate checks had higher average liabilities and liabilities-to-income ratios.
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U2 - 10.1162/REST_a_00391
DO - 10.1162/REST_a_00391
M3 - Article
AN - SCOPUS:84928186690
SN - 0034-6535
VL - 96
SP - 431
EP - 443
JO - Review of Economics and Statistics
JF - Review of Economics and Statistics
IS - 3
ER -