Debt Portfolios

Thomas Hintermaier and Winfried Koeniger

No 5653, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We provide a model with endogenous portfolios of secured and unsecured household debt. Secured debt is collateralized by owner-occupied housing whereas unsecured debt can be discharged according to bankruptcy regulations. We show that the calibrated model matches important quantitative characteristics of observed wealth and debt portfolios for prime-age consumers in the U.S. We then establish the quantitative result that home equity does not serve as informal collateral for unsecured debt since, as in the data, unsecured debtors hold small amounts of home equity in equilibrium. Thus, observed variations in homestead exemptions, which are an important part of U.S. bankruptcy regulation, have a small effect on the quantity and price of unsecured debt.

Keywords: commitment; bankruptcy; collateral; housing; household debt portfolios; income risk (search for similar items in EconPapers)
JEL-codes: D91 E21 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2011-04
New Economics Papers: this item is included in nep-dge, nep-mac, nep-reg and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Forthcoming - revised version published in: American Economic Journal: Macroeconomics, 2016, 8 (4), 103-141

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Related works:
Journal Article: Debt Portfolios and Homestead Exemptions (2016)
Working Paper: Debt Portfolios (2011)
Working Paper: Debt Portfolios (2009)
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