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Track M2-1: Household Debt
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Presentations | ||
Financial Breakups 1Rice University; 2American University; 3Virginia Tech; 4University of Rochester Using a large representative sample of individual credit bureau records, we document that personal financial distress increases a married couple’s probability of divorce by 4%-8%. Foreclosures strongly affect marital dissolution, whereas Chapter 13 bankruptcies, which protect debtors from foreclosure, have the opposite effect. These effects of foreclosure and bankruptcy protection on household stability are distinct from health- or employment-related shocks. We isolate plausibly exogenous variation in the probability of foreclosure by exploiting financial assistance programs that protect homeowners after natural disasters. Our findings highlight the role of financial stability and housing security as determinants of family structures and suggest that household finances have broad social consequences.
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