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American consumer bankruptcy provides for a Fresh Start through the discharge of a household's debt. Until recently, many European countries specified a No Fresh Start policy of lifelong liability for debt. The trade-off between these two policies is that while Fresh Start provides insurance across states, it drives up interest rates and thereby makes(More)
Preliminary Abstract Personal bankruptcies in the United States have increased dramatically, rising from 1.4 per thousand working age population in 1970 to 8.5 in 2002. We use a heterogeneous agent life-cycle model with competitive financial intermediaries who can observe households' earnings, age and current asset holdings to evaluate several commonly(More)
We examine a monetary economy wherein endogenous asset market segmentation permits the extent of household participation in open market operations to vary smoothly with changes in aggregate conditions. While we impose no stickiness at the microeconomic level in either prices or portfolio adjustment, we …nd that our ‡exible asset market segmentation can(More)
A large literature documents that several economic decisions occur infrequently. For instance, individual investors adjust their portfolios sporadically even though the prices of many assets experience large fluctuations at high frequency. Similarly, firms do not reset the price every time the costs of inputs change. These infrequent adjustments at the(More)
An increase in credit supply driven by looser lending constraints in the mortgage market can explain four empirical features of the housing boom before the Great Recession: the unprecedented rise in home prices, the surge in household debt, the stability of debt relative to house values, and the fall in mortgage rates. These facts are more difficult to(More)
I study the implications of various bankruptcy regimes for student loans on college investment, human capital accumulation, and earnings in a heterogeneous life-cycle economy with risky human capital investment. The option to discharge one's debt under a liquidation regime helps alleviate some of the risk of investing in human capital. However,(More)
This paper studies how countries in different stages of development respond to the emergence of a poor, giant economy. Recent examples of emerging giants include China towards the end of the 20th century and Japan (and to some extent western Europe) in the middle of the 20th century. The central finding of this paper is that an emerging giant sets in motion(More)
This paper studies the choice between general and specific human capital. A trade-off arises because general human capital, while less productive, can easily be reallocated across firms. Accordingly, the fraction of individuals with specific human capital depends on the amount of uncertainty in the economy. Our model implies that while economies with more(More)
supports research bearing on economic and public policy issues. The SIEPR Discussion Paper Series reports on research and policy analysis conducted by researchers affiliated with the Institute. Working papers in this series reflect the views of the authors and not necessarily those of Abstract The recent episode of rising consumer bankruptcy and increasing(More)