Affiliation:
1. Federal Reserve Bank of Richmond
2. Federal Reserve Bank of Kansas City
3. Federal Reserve Bank of St. Louis
Abstract
Abstract
Using proprietary panel data, we show that many U.S. consumers experience financial distress (35% when distress is defined by having debt in severe delinquency, e.g.) at some point in their lives. However, most distress events are concentrated on a much smaller proportion of consumers in persistent trouble: fewer than 10% of borrowers account for half of all distress events. These facts can be largely accounted for in a straightforward extension of a workhorse model of unsecured debt with informal default that accommodates a simple form of heterogeneity in time preference.
Received November 10, 2017; editorial decision November 12, 2018 by Editor Stijn Van Nieuwerburgh.
Publisher
Oxford University Press (OUP)
Subject
Economics and Econometrics,Finance,Accounting
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