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Office of Survey Methods Research
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Published Year: 2002
Survey/Program(s): Journal of Economics and Finance, Vol. 28, No. 3, Fall
Catalog: Economic Working Paper
WP Number: WP-359
Publication Status / Disposition: See Journal of Economics and Finance, Vol. 28, No. 3, Fall 2004, pp. 348-360.
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Duration Dependence in Personal Bankruptcy
Abstract
This paper represents the first use of the Panel Study of Income Dynamics to examine whether there is duration dependence in personal bankruptcy. The results suggest that there is positive duration dependence in the first three spell-years, followed by negative duration dependence. Another interesting finding is that the median financial benefit for the filers in the year they filed is less than the median benefit in the year before they filed. This indicates that not all households file for bankruptcy when its financial benefit is largest. These findings suggest that some filers avoid bankruptcy even when bankruptcy is financially beneficial.