Default, insurance, and debt over the life-cycle

• 成果类型: Article
• 署名作者: Athreya, Kartik B.
• 署名单位: Federal Reserve System - USA; Federal Reserve Bank - Richmond
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2008.05.006
• 发表日期: 2008
• 页码: 752-774
• 关键词: default; unsecured debt; life-cycle consumption inequality

摘要

The widespread use of debt and default suggests that unsecured credit markets play an important role in consumption smoothing. In this paper, I address two previously unanswered questions. First, how does policy towards debt default affect the evolution of consumption and net worth over the life-cycle? Second, how does debt default policy interact with social insurance over the life-cycle? The findings are as follows. First, US default policy appears lax, in the sense that it creates severe credit constraints, especially for the young. Second, eliminating default will lower consumption inequality among the young, but will increase it among the old. Third, social insurance alters default risk and, in turn, loan pricing, and therefore matters for purely intertemporal smoothing. (c) 2008 Elsevier B.V. All rights reserved.