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SUMMARY:Information and Stigma in Household Bankruptcy Decisions - Burcu D
 uygan-Bump\, Federal Reserve Bank of Boston
DTSTART:20080425T160000Z
DTEND:20080425T173000Z
UID:TALK11990@talks.cam.ac.uk
CONTACT:Eva Gottschalk
DESCRIPTION:*Information and Stigma in Household Bankruptcy Decisions* \n\
 n_Ethan Cohen-Cole and Burcu Duygan-Bump\, Federal Reserve Bank of Boston_
 \n\nAbstract \n\n\nUsing a very large national sample from one of the bigg
 est US credit bureaus\, this paper investigates the empirical relevance of
  stigma and other social factors on household bankruptcy decisions. Follow
 ing the dramatic rise in personal bankruptcies\, and the associated public
  policy debate\, many researchers have attempted to analyze the micro dyna
 mics of household bankruptcy decisions. Many potential explanations have b
 een identified\, and there is a growing consensus that households have bec
 ome\, or are becoming\, more willing to default. Most observers have conje
 ctured that the increased willingness to default reflects a diminution of 
 the traditionally associated stigma. In this paper\, we exploit sociologic
 al evidence and draw on a new methodology to disentangle stigma and social
  learning---two of the most important social factors affecting default. Ou
 r results show that both factors significant\; although on average societa
 l stigma dominates the role of information. We also find that social stigm
 a has indeed decreased somewhat on a national basis\, as many have specula
 ted. However\, we also show that this aggregate trend disguises enormous h
 eterogeneity. Exploiting the large size of our dataset\, we evaluate diffe
 rences in social patterns by community income and education levels. Our re
 sults show that while social factors appear quite important among the poor
  and less educated\, the social stigma attached to bankruptcy has increase
 d and information costs have decreased among these very groups. On the con
 trary\, we show that it is among the rich and well educated that stigma ha
 s declined. These findings suggest that the overall increase in the bankru
 ptcy rates cannot be explained by a decrease in social stigma\, because it
  has fallen only for a small group of the population and one that has not 
 been greatly impacted by bankruptcy. This implies that the key driver of t
 he recent increases in bankruptcy is due either to changes in transaction 
 and information costs or to changes in individual exposure to macroeconomi
 c risk. \n\n
LOCATION:LT2\, Judge Business School
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