Michelle J. White

The Household Bankruptcy Decision

Personal bankruptcy filings have risen from 0.3 percent of households per year in 1984 to around 1.35 percent in 1998 and 1999, transforming bankruptcy from a rare occurrence to a routine event. Lenders lost about

Firm suburbanization and urban subcenters

39 billion in 1998 due to personal bankruptcy filings. But economists have little understanding of why households file for bankruptcy or why filings have increased so rapidly. Until very recently, studying the household bankruptcy decision was very difficult, because no household-level data set existed that included information on bankruptcy filings. In this paper, we use new data from the Panel Study of Income Dynamics, which includes information on bankruptcy filings, to estimate a model of households’ bankruptcy decisions. We find support for the strategic model of bankruptcy, which predicts that households are more likely to file when their financial benefit from filing is higher. Our model predicts that an increase of

Personal Bankruptcy and Credit Supply and Demand

1,000 in households’ financial benefit from bankruptcy would result in a 7-percent increase in the number of bankruptcy filings. Our model also predicts that if the 1997 National Bankruptcy Review Commission’s proposed changes in bankruptcy exemption levels were implemented, there would be a 16-percent increase in the number of bankruptcy filings each year. But if the

Location choice and commuting behavior in cities with decentralized employment

100,000 cap on homestead exemptions recently passed by the U.S. Senate were adopted, our model predicts that there would be only a negligible effect on the number of filings. We find little support for the nonstrategic model of bankruptcy which predicts that households file when adverse events occur which reduce their ability to repay. Finally, controlling for state and time fixed effects, our model shows that households are more likely to file for bankruptcy if they live in districts with higher aggregate filing rates.

Public Policy Toward Bankruptcy: Me-First and Other Priority Rules

Abstract The theory of firm location within an urban area is extended to consider a city in which firms can export their output via a suburban terminal as well as via the usual CBD terminal. Firms benefit from suburbanization since freight transport costs are reduced and since they can pay lower wages, but labor may be scarce in the suburbs. This forces suburban firms to readjust their wages, causing some workers to out-commute and giving all workers an incentive to relocate. The existence of an employment subcenter under labor scarcity conditions is shown to cause household utility levels to rise, the size of the metropolitan area to increase, and overall urban land value to change indeterminately. Finally, determination of the optimal location for a suburban terminal is considered.

The effect of zoning on land value

This paper examines how personal bankruptcy and bankruptcy exemptions affect the supply and demand for credit. While generous state-level bankruptcy exemptions are probably viewed by most policymakers as benefitting less-well-off borrowers, our results using data from the 1983 Survey of Consumer Finances suggest they increase the amount of credit held by high-asset households and reduce the availability and amount of credit to low-asset households, conditioning on observable characteristics. We also find evidence that interest rates on automobile loans for low-asset households are higher in high exemption states. Thus, bankruptcy exemptions redistribute credit toward borrowers with high assets.

The "Arms Race" on American Roads: The Effect of Sport Utility Vehicles and Pickup Trucks on Traffic Safety

This paper explores residential and job location patterns and commuting behavior in a monocentric urban model with decentralized employment. We show that, in some cases, identical households choose different residential rings depending on their workers’ job locations. This means that high-income households whose workers work near the central business district (CBD) may choose residential locations near the CBD rather than in the suburbs if their workers have CBD job locations. In this case there will be a nonmonotonic relationship in the city between income level and residential distance from the CBD. Identical workers also are shown to choose different residential locations depending on their job locations. Wage gradients for workers as a function of job location are derived. The model also suggests that the skill composition of a firm’s workforce affects its incentive to move to the suburbs. Implications of the model for commuting patterns are explored. 0 1988 Academic

The Costs of Corporate Bankruptcy: A U.S.-European Comparison

This article analyzes the economic efficiency properties of bankruptcy liquidation rules, including both conventional legal rules and the me-first rule proposed by economists. It also examines the incentives of firms to undertake investment projects when bankruptcy is a possible outcome. The results show that none of the rules leads to private investment incentives which are socially efficient. Depending on circumstances, it may be privately profitable to liquidate firms which should be continued or to continue firms which should be liquidated. Investments in low productivity projects may be approved while worthwhile projects may be abandoned. Public policy implications are considered.

The tax subsidy to owner-occupied housing: Who benefits?

Two types of zoning are identified: externality zoning, which is designed to achieve a Pareto efficient pattern of land use, and fiscal zoning, which is designed to accomplish some other objective. (The latter, for instance, may be aimed at minimizing the tax rate in a community.) The paper shows that it is not in general possible using a priori theory to predict the sign (positive or negative) of the effect of either of these forms of zoning on aggregate land value in a community. It is shown, however, that under plausible assumption it can be argued that zoning as currently practiced in many U. S. communities probably has the effect of lowering aggregate land values in the communities doing the zoning.

An Empirical Test of the Comparative and Contributory Negligence Rules in Accident Law

Drivers have been running an “arms race” on American roads by buying increasingly large vehicles such as sport utility vehicles and light trucks. But large vehicles pose an increased danger to occupants of smaller vehicles and to pedestrians, bicyclists, and motorcyclists. This paper measures both the internal effect of large vehicles on their own occupants’ safety and their external effect on others. The results show that light trucks are extremely deadly. For each 1 million light trucks that replace cars, between 34 and 93 additional car occupants, pedestrians, bicyclists, or motorcyclists are killed per year, and the value of the lives lost is between