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Economic Quarterly

Spring 2005

Equilibrium Models of Personal Bankruptcy: A Survey

Kartik B. Athreya

A comparison of models and results from selected papers on personal bankruptcy establishes how particular modeling assumptions matter for the implications of bankruptcy. For example, it can be argued that only under income processes that allow for large shocks to net worth can bankruptcy play a role in improving welfare. However, despite the progress evident from the work so far, questions remain, the resolution of which is critical to forming a definitive view of the role for personal default.

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