dealing with consumer default bankruptcy vs garnishment abstract what are the positive and normative implications of eliminating bankruptcy protection for indebted individuals without bankruptcy protection creditors can collect on defaulted debt to the extent permitted by wage garnishment laws the elimination lowers the default premium on unsecured debt and permits low net worth individuals suffering bad earnings shocks to smooth consumption by borrowing there is a large increase in consumer debt financed essentially by super wealthy individuals a modest drop in capital per worker and a higher frequency of consumer default average welfare rises by 1 of consumption in perpetuity with about 90 of households favoring the change

decarbonizing residential building energy a cost effective approach abstract given the problem of climate change the world economy must eventually switch to carbon neutral energy in this study we present a cost effectiveness approach given a goal of decarbonization the objective is to accomplish this at minimum cost for residential building energy we show that total cost is minimized by equating marginal cost of building energy conserved with marginal cost of obtaining carbon free energy where we express costs of both in dollars per kwh we describe how the cost of solar photovoltaic energy provides an upper bound on the marginal cost of carbon free energy and thus an upper bound on marginal cost of conserved energy one should not necessarily spend more on energy conservation than the cost of photovoltaic energy though there are several caveats a case study from vermont usa illustrates these principles and implementation issues with marginal analysis of energy conservation from a policy perspective the principles presented suggest that either carbon taxes or carbon limits could be used to decarbonize building energy at minimum cost but that approaches using renewable energy subsidies or prescriptive building codes result in greater decarbonization costs to society this suggests that new policy approaches be adopted

credible public policy abstract credible public policy is defined in a way that incorporates competitive equilibrium behavior for households and subgame perfect nash equilibrium behavior for the government it is shown that the set of all equilibrium outcome paths for credible policies can be constructed by using arguments analogous to those of abreu 1988 for repeated games the results are then extended to systems with state variables simple models of monetary policy and capital taxation are studied by way of example

optimal taxation in models of endogenous growth we study the problem of optimal taxation in three infinite horizon representative agent endogenous growth models the first model is a convex model in which physical and human capital are perfectly symmetric our second model incorporates elastic labor supply through a lucas style technology analysis of these two models points out the danger of assuming that government expenditures are exogenous in our third model we include government expenditures as a productive input in capital formation showing that the limiting tax rate on capital is no longer zero in numerical simulations we find similar effects on growth and welfare in all three models

optimal taxes without commitment abstract in the problem of optimal taxation in an economy with labor and capital the optimal solution when the government can commit to a sequence of tax rates entails that the tax on capital tends to zero in the limit with all the tax burden on labor it is well known however that this solution is time inconsistent so if the commitment power is not perfect this second best tax plan will not be sustainable we model explicitly the trade off between the cost of revising the tax plan and the benefit of the revision as a result when commitment is not possible both the limit tax rate and the steady state capital are different from their levels in the second best solution limit taxes on capital may be strictly positive but it may also be the case that the only sustainable plan has subsidies to capital the subsidies induce an overaccumulation of capital which becomes a commitment device against revisions of the tax plan journal of economic literature classification numbers h21 c73

the un importance of chapter 7 wealth exemption levels this paper examines the effects of the chapter 7 wealth exemption level on welfare bankruptcy filings debt and on asset holdings i build a heterogeneous agent life cycle model which features uninsurable income and expense shocks moreover households can borrow and save simultaneously when a borrower defaults on her debt by filing for chapter 7 bankruptcy she can keep her assets up to the wealth exemption level wealth exemption levels are important for two reasons first they explain the extensive and intensive margin of the credit card debt puzzle around thirty percent of borrowers both in the model and in the data who borrow at high interest rates simultaneously save at low interest rates however these borrowers borrow and save only relatively small amounts a few thousand u s dollars second ignoring the exemption level biases results because it overstates the costs of defaulting the welfare gains from chapter 7 compared to the european system where debt is not discharged are twice as high when exemption levels are positive compared to when they are ignored at the same time wealth exemption levels are unimportant in the sense that they have an impact only at low exemption levels the effects of increases in the exemption level fade out very quickly there is no strong positive relationship between exemption levels which vary across u s states and default rates in the model this is in contrast to the previous literature but consistent with the data the reason is that those borrowers who might default do not own much wealth therefore only very few households are affected by increases in the exemption level

explaining the puzzle of cross state differences in bankruptcy rates abstract bankruptcy rates vary tremendously across states and it is not obvious why the number of candidate explanations is large relative to the number of states to overcome this problem we use zip code level data to identify the importance of demographic variables using within state variation this preserves state level degrees of freedom to identify the impact of state policy variables demographics wage garnishment restrictions and the fraction of bankruptcies filed under chapter 13 explain 70 percent of the variation in filing rates across states exemption rates size of public safety nets and payday loan regulations contribute virtually nothing to the cross state variance in filing rates our findings suggest that state bankruptcy rates reflect the relative costs of filing for formal bankruptcy versus informal default states without effective wage garnishment provisions allow easy informal default furthermore repayment plans mandated under chapter 13 bankruptcy often lead to repeated bank

financial literacy and mortgage equity withdrawals abstract mortgage equity withdrawals mew are correlated with covariates consistent with a permanent income framework augmented for credit constraints we assess linkages between mew and financial literacy education using the health and retirement study hrs and panel study of income dynamics psid we find that the financially literate are 3 5 percentage points less likely to withdraw housing equity via non home equity loan mortgages using the hrs while college graduates are 5 percentage points less likely than those without a high school degree in the psid among those withdrawing housing equity in the psid college graduates extract significantly less equity and are less likely to have high levels of housing leverage after doing so

time consistent taxation by a government with redistributive goals abstract in a dynamic economy whose government is interested in both equity and efficiency time consistency problems arise even if the government has access to nondistortionary tax instruments moral hazard in production leads to a nondegenerate distribution of income which the government would like to flatten ex post self enforcing social agreements can mitigate the tendency toward excessive redistribution we investigate the nature of the distortions caused by the time consistency problem and show that in the constrained optimal equilibrium usually a linear tax schedule is imposed this remains true if renegotiation of the social agreement is possible journal of economic literature classification numbers c7 c73 e6 h21

optimal fiscal policy in a business cycle model this paper develops the quantitative implications of optimal fiscal policy in a business cycle model in a stationary equilibrium the ex ante tax rate on capital income is approximately zero there is an equivalence class of ex post capital income tax rates and bond policies that support a given allocation within this class the optimal ex post capital tax rates can range from close to independently and identically distributed to close to a random walk the tax rate on labor income fluctuates very little and inherits the persistence properties of the exogenous shocks thus there is no presumption that optimal labor tax rates follow a random walk most of the welfare gains realized by switching from a tax system like that of the united states to the ramsey system come from an initial period of high taxation on capital income

the hotspots reference routes and research trends of marginal abatement costs a systematic review abstract as one of the most effective means of evaluating environmental policies marginal abatement costs macs have been adopted in a growing body of research this study characterizes the mac related literature from 1993 to 2018 on web of science based on a systematic review bibliometric analysis and mind mapping the results classify the research hotspots into influential factors methods and empirical applications the three most frequently mentioned influential factors are technical change discount rates and energy prices compared with top down models bottom up models including engineering model and expert based method are the most widely used improvements in the former focus on strengthening market behavior effect while those in the latter aim to overcome the weaknesses of negative costs and lack of interaction across measures mac applications focus on environmental policies with two new research areas recently emerging co benefits and sectoral abatement costs furthermore a reference route is proposed by summarizing the applicability of methods and matching relationships among influential factors methods and empirical problems finally potential research directions are summarized based on the identified research hotspots and a similar co word analysis in marginal cost field such as considering the effects of both multiple influential factors and the interaction among factors on maccs

personal bankruptcy and credit supply and demand 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 policy makers as benefiting less well off borrowers our results using data from the 1983 survey of consumer finances suggest that 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 thus bankruptcy exemptions redistribute credit toward borrowers with high assets interest rates on automobile loans for low asset households also appear to be higher in high exemption states

welfare implications of the bankruptcy reform act of 1999 abstract in recent years personal bankruptcy has become an important issue to consumers creditors and legislators alike over 40 billion dollars of unsecured debt were discharged in 1998 by 1 44 million households these losses have led legislators to propose a variety of changes in bankruptcy law the most important and recent of which is the bankruptcy reform act of 1999 ba99 i develop a dynamic stochastic general equilibrium model of personal bankruptcy to investigate the trade off between the consumption smoothing role of bankruptcy and the interest rate and deadweight costs it imposes i find that stringent means tests would reduce filing rates only slightly and would have only modest welfare consequences on the other hand the elimination of bankruptcy altogether is found to have substantial benefits this result is robust to income shock persistence and to stringency in the application of means tests

the ranking of negative cost emissions reduction measures a flaw has been identified in the calculation of the cost effectiveness in marginal abatement cost curves maccs the problem affects negative cost emissions reduction measures those that produce a return on investment the resulting ranking sometimes favours measures that produce low emissions savings and is therefore unreliable the issue is important because incorrect ranking means a potential failure to achieve the best value outcome a simple mathematical analysis shows that not only is the standard cost effectiveness calculation inadequate for ranking negative cost measures but there is no possible replacement that satisfies reasonable requirements furthermore the concept of negative cost effectiveness is found to be unsound and its use should be avoided among other things this means that maccs are unsuitable for ranking negative cost measures as a result maccs produced by a range of organizations including uk government departments may need to be revised an alternative partial ranking method has been devised by making use of pareto optimization the outcome can be presented as a stacked bar chart that indicates both the preferred ordering and the total emissions saving available for each measure without specifying a cost effectiveness

religious competition and reallocation using novel microdata we document an important unintended consequence of the protestant reformation a reallocation of resources from religious to secular purposes to understand this process we propose a conceptual framework in which the introduction of religious competition shifts political markets where religious authorities provide legitimacy to rulers in exchange for control over resources consistent with our framework religious competition changed the balance of power between secular and religious elites secular authorities acquired enormous amounts of wealth from monasteries closed during the reformation particularly in protestant regions this transfer of resources had significant consequences first it shifted the allocation of upper tail human capital graduates of protestant universities increasingly took secular especially administrative occupations protestant university students increasingly studied secular subjects especially degrees that prepared students for public sector jobs rather than church sector specific theology second it affected the sectoral composition of fixed investment particularly in protestant regions new construction shifted from religious toward secular purposes especially the building of palaces and administrative buildings which reflected the increased wealth and power of secular lords reallocation was not driven by preexisting economic or cultural differences our findings indicate that the reformation played an important causal role in the secularization of the west

redistributive taxation in a simple perfect foresight model abstract we investigate the redistributive potential of capital taxation in an intertemporal maximizing model of capital formation first even unanticipated redistributive capital taxation is severely limited in its effectiveness since it depresses wages second under any convergent redistributive tax policy which maximizes a paretian social objective the capital income tax will converge to zero independent of the factor supply elasticities these results are independent of workers holdings of capital

optimal taxation without state contingent debt in an economy studied by lucas and stokey tax rates inherit the serial correlation structure of government expenditures belying barro s earlier result that taxes should be a random walk for any stochastic process of government expenditures to recover a version of barro s random walk tax smoothing outcome we modify lucas and stokey s economy to permit only risk free debt having only risk free debt confronts the ramsey planner with additional constraints on equilibrium allocations beyond one imposed by lucas and stokey s assumption of complete markets the ramsey outcome blends features of barro s model with lucas and stokey s in our model the contemporaneous effects of exogenous government expenditures on the government deficit and taxes resemble those in lucas and stokey s model but incomplete markets put a near unit root component into government debt and taxes an outcome like barro s however we show that without ad hoc limits on the government s asset holdings outcomes can diverge in importa

introduction a symposium on the predatory state economists have adopted two broad perspectives on the state contractual i e provider of public goods and services and predatory coercive and extractive by a predatory state we mean a state that promotes the private interests of dominant groups within the state such as politicians the army and bureaucrats or influential private groups with strong lobbying powers neo institutional economists support an extended version of the contractual perspective in which the state is not simply a benevolent dictator but may itself be composed of predators however it considers predation as only a means to promote protection by contrast a predatory vision of the state argues that while protection and predation are two faces of the same coin a predatory state protects only to promote its predation on the private sector this symposium explores how a predatory approach to the state can shed light on all types of state from liberal democratic to authoritarian and failed ones both in the past and present

the failure of marginal abatement cost curves in optimising a transition to a low carbon energy supply abstract one of the tools used to optimise actions in reducing the carbon intensity of the economy is to use marginal abatement cost mac curves whilst these are known to be imperfect they are widely used to prioritise actions and often in a way that is incorrect in particular whilst their use for measures which have positive costs and a net reduction in carbon emissions can correctly rank the measures for effectiveness use for ranking measures which have a net negative cost including a wide range of energy efficiency measures is entirely inappropriate and leads to perverse and incorrect outcomes as a result many assessments of low carbon actions are fundamentally flawed in their ranking of effectiveness and action is needed to overcome this and allow an optimum outcome an alternative approach is suggested here

auto credit and the 2005 bankruptcy reform the impact of eliminating cramdowns auto lenders were perhaps the biggest winners of the 2005 bankruptcy reform as chapter 13 bankruptcy filers can no longer cramdown the amount owed on recent auto loans we estimate the causal effect of this anticramdown provision on the price and quantity of auto credit exploiting historical variation in states usage of chapter 13 bankruptcy we find strong evidence that eliminating cramdowns decreased interest rates and some evidence that loan sizes increased among subprime borrowers the decline in interest rates is persistent and is robust to a battery of sensitivity checks we rule out other reform changes as possible causes received september 29 2016 editorial decision january 15 2019 by editor philip strahan authors have furnished an internet appendix which is available on the oxford university press web site next to the link to the final published paper online

an empirical analysis of personal bankruptcy and delinquency this article uses a new dataset of credit card accounts to analyze credit card delinquency personal bankruptcy and the stability of credit risk models we estimate duration models for default and assess the relative importance of different variables in predicting default we investigate how the propensity to default has changed over time disentangling the two leading explanations for the recent increase in default rates a deterioration in the risk composition of borrowers versus an increase in borrowers willingness to default due to declines in default costs even after controlling for risk composition and economic fundamentals the propensity to default significantly increased between 1995 and 1997 standard default models missed an important time varying default factor consistent with a decline in default costs debt issued by consumers is an understudied asset class there has been particularly little academic study of recent trends in default on this debt between 1994 and 1997 the number of personal bankruptcy filings in the united states rose by about 75 the 1 35 million filings in 1997 represented well over 1 of u s households delinquency rates on credit cards rose almost as sharply federal reserve bank of cleveland 1998 the resulting losses to lenders amounted to a sizable fraction of the interest payments they collect potentially raising the average cost of credit these trends in default both in bankruptcy and delinquency are especially surprising in light of the strong economy over the period they provide an unusually rich source of variation to test the stability of models that forecast personal default and of credit risk models more generally there are two leading explanations for these trends first the risk composition of borrowers might have worsened under the risk effect less

on the optimal taxation of capital income abstract we show that in models in which labor services are supplied jointly with human capital the chamley and judd result on zero capital income taxation in the limit extends to labor taxes as long as accumulation technologies are constant returns to scale moreover for a class of widely used preferences consumption taxes are zero in the limit as well however we show by the construction of two examples that these results no longer hold for certains types of restrictions on tax rates or if there are profits generated journal of economic literatureclassification numbers e62 h21

optimal taxation and spending in general competitive growth models abstract we find that the optimal long run tax on capital income is zero even if the capital stock does not converge to a steady state nor to a steady state growth rate the optimal tax on human capital is also zero if human capital is not a final good but the long run wage tax is not generally zero we argue that consumption tax proposals such as the flat tax are not consumption taxes and are biased against human capital

on the cost effectiveness of national economy wide greenhouse gas emissions abatement measures abstract this paper explores cost effective greenhouse gas abatement options for the european union member state of cyprus for those sectors of the national economy that are not subject to the european emissions trading system the analysis leads to the construction of a baseline and several alternative marginal emission abatement cost curves it addresses all economic sectors and considers all different types of mitigation measures improving energy efficiency switching to low or zero carbon fuels and inducing behavioural change towards public transport modes we apply nationally appropriate data that are mainly derived from local market information and judgement of national experts finally we present results of several sensitivity analyses which address main shortcomings of marginal abatement cost curves that have been identified in the literature and discuss the policy implications of each one of them apart from its relevance for eu member states this assessment is useful for all countries seeking guidance in their decarbonisation strategies

communication commitment and growth abstract we study the effect on the growth of an economy of alternative financing opportunities in a stochastic growth model with incentive constraints efficient accumulation mechanisms are designed and computed for economies that differ in their incentive structure we show that when borrowing is subject to information constraints there is a computable efficient transfer mechanism that does not affect capital accumulation and investment patterns even though consumption patterns and the distribution of wealth are affected in contrast enforcement constraints can severely reduce the outside financing opportunities and affect investment patters and economic growth we adapt numerical algorithms for obtaining numerical solutions of these models

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 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 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 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

zakat islam s missed opportunity to limit predatory taxation one of islam s five canonical pillars is a predictable fixed and mildly progressive tax system called zakat it was meant to finance various causes typical of a pre modern government implicit in the entire transfer system was personal property rights as well as constraints on government two key elements of a liberal order those features could have provided the starting point for broadening political liberties under a state with explicitly restricted functions instead just a few decades after the rise of islam zakat opened the door to arbitrary political rule and material insecurity a major reason is that the quran does not make explicit the underlying principles of governance it simply outlines the specifics of zakat as they related to conditions in seventh century arabia

cost effectiveness of greenhouse gas mitigation in transport a review of methodological approaches and their impact abstract a review is given of methodological practices for ex ante cost effectiveness analysis cea of transport greenhouse gas ghg mitigation measures e g fuel economy and co2 standards for road vehicles in the us and eu besides the fundamental differences between different types of policies and abatement options which inherently result in different cea outcomes differences in methodological choices and assumptions are another important source of variation in cea outcomes fourteen methodological issues clustered into six groups are identified on which thirty three selected studies are systematically reviewed the potential variation between lower and upper cost effectiveness estimates for ghg mitigation measures in transport resulting from different methodological choices and assumptions lies in the order of 400 per tonne co2 eq the practise of using cea for policy making could improve considerably by clearly indicating the specific purpose of the cea and its strengths and limitations for policy decisions another improvement is related to the dominant approach in transport ghg mitigation studies the bottom up financial technical approach which assesses isolated effects implying considerable limitations for policy making a shift to welfare economic approaches using a hybrid model has the potential to establish an improved assessment of transport ghg mitigation measures based on realistic market responses and behavioural change

the applicability of marginal abatement cost approach a comprehensive review abstract the marginal abatement cost mac methodology is widely used in climate change policies policy makers rely on mac to assess feasible strategies and related costs to achieve emission reduction goals this paper introduces a variety of mac methodologies aiming at solving diverse problems which utilizes various calculable logic thus producing different results and implications this study applies a mind mapping method to capture differentiation of mac methods and systematically classify mac methodologies the applicability path analysis was proposed based on principles such as stakeholder type decision making objectives cost concept strategy mode and information scope our goal is to assess the applicability of different methodologies to reduce misuse by policy makers and to serve as a guide for subsequent research which might prompt and lead to the derivation of more consequential results in future studies the results of this study suggest that the complex method is not always better than the simplified method because policy makers are required to select the appropriate method according to the type of information needed it may even be suggested that mac could be reliable by ranking relative value of options compared with baseline rather than focusing on the absolute value of individual measures

optimal taxation of capital income in general equilibrium with infinite lives this paper analyzes the optimal tax on capital income in general equilibrium models of the second best agents have infinite lives and utility functions which are extensions from the koopmans form the population is heterogeneous the important property of the models is the equality between the social and the private discount rates in the long run i find that the optimal tax rate is zero in the long run for a special case of additively separable utility functions i then determine the tax rates along the dynamic path and conditions that are sufficient for the local stability of the steady state

the effect of interest rate caps on bankruptcy synthetic control evidence from recent payday lending bans abstract citing consumer protection concerns several states have recently enacted interest rate caps on small loans after cataloguing the history of such legislation we test whether these laws caused a decrease in the number of payday lending establishments and subsequently prompted variation on incidence of bankruptcy filings to motivate a causal interpretation of our estimates we create a synthetic control that serves as a counterfactual from which we estimate the aggregate treatment effect of these interest rate ceilings importantly we estimate the treatment effect for each period after the imposition of the cap yielding novel insights about the dynamic heterogeneity in the relationship between payday loan access and bankruptcy our results show payday lending establishments drop by approximately 100 a banishment of the industry we find no short run or long run effects of these bans on bankruptcy the range of our estimates allows us to rule out magnitudes that were documented in several previous studies

cyclical and noncyclical redistributive taxation consider the optimal time path of a tax on capital income the proceeds of which are transferred to labor in a lump sum it is known from earlier open loop formulations that if the optimal rate of tax converges to a point it converges to zero implying that in the long run a tax on capital income can do nothing for social welfare it is now shown that the optimal rate of tax need not converge to zero and in the case of feedback formulations that it may converge to a positive or negative number or to a limit cycle copyright 1993 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the political economy of property exemption laws abstract exemption laws enable people who default on loans to protect certain assets from liquidation every state has its own set of exemption laws and they vary widely the 1978 federal bankruptcy law contains a set of national exemptions which debtors in bankruptcy are permitted to use instead of their state s exemptions unless the state has formally opted out of the federal system we contend that states decisions to opt out shed light on their exemption levels we find that states are more likely to opt out if their state exemption is lower than the federal exemption and that states are more likely to opt out if they also have a high bankruptcy filing rate and transfer little money to the poor these latter findings suggest that studies that examine the impact of exemptions on for example the bankruptcy rate should not treat exemption levels as exogenous variables

the y factor for climate change abatement a method to rank options beyond abatement costs abstract the tools available to translate climate targets into abatement actions are mainly based on costs and technical feasibility options for greenhouse gas abatement span all sectors all countries and involve a huge variety of technologies the reasons for abatement to be realized or not are diverse and complex in particular the political discussion why many affordable options do not materialize is naive and ad hoc here we show the y factor an approach for a quick scan of abatement options against a set of prominent abatement barriers we define 12 factors which capture a broad set of barriers related to 1 costs and financing 2 multi actor complexity 3 physical interdependencies and 4 behaviour we rank 24 abatement options using an explicit but coarse scoring for these barriers we show that all abatement options have implementation barriers many of which may well drastically impact their implementation beyond what would be expected from their abatement costs the analysis implies that the relation between abatement costs and the barriers withholding implementation is not straightforward and calls for a deliberate policy debate on prioritization and policy intervention the y factor structures such a policy debate