
Michelle J. WhiteUniversity of California, San Diego | UCSD · Department of Economics
Michelle J. White
PhD
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123
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Introduction
Publications
Publications (123)
Both the proportion of bankruptcy filings by the elderly and the proportion of foreclosure starts that affect the elderly have increased dramatically over the past 20 years, suggesting an increase in financial distress of the elderly relative to younger age groups. This chapter uses new data to examine whether these trends can be explained by eithe...
We assess the credit market impact of mortgage “strip-down” -- reducing the principal of underwater residential mortgages to the current market value of the property for homeowners who file for bankruptcy under Chapter 7 or Chapter 13. Strip-down of residential mortgages in bankruptcy was proposed in 2009 as a means of reducing foreclosures during...
This chapter presents a review bankruptcy law. It examines whether and when the law encourages debtors and creditors to behave economically efficient ways, both before and after they are in financial distress. It also considers how bankruptcy law could be changed to improve economic efficiency. The discussion abstracts from individual countries’ ba...
Bankruptcy is the legal process by which financially distressed firms and individuals resolve their debts. It is an important part of the legal environment for small business owners and their lenders because small businesses are very risky and often fail and because bankruptcy law affects how business owners and their lenders are treated in the eve...
We assess the credit market impact of mortgage “strip-down” -- reducing the principal of underwater residential mortgages to the current market value of the property for homeowners who file for bankruptcy under Chapter 7 or Chapter 13. Strip-down of residential mortgages in bankruptcy was proposed in 2009 as a means of reducing foreclosures during...
My philosophy of economics has mainly involved how to get into and stay in the field. This essay gives some reminiscences of the bad old days and what it was like to be among the first women in academic economics. Many economists have interesting stories about how and why they went into the field. Mine is that I was an undergraduate at Harvard duri...
In this paper we examine whether homeowning benefits children by testing whether children of homeowners stay in school longer than children of renters and whether daughters of homeowners are less likely to have children as teenagers than daughters of renters. We use both probit models and a bivariate probit technique which takes account of possible...
We test the hypothesis that local government officials in jurisdictions that have higher local sales taxes are more likely to use fiscal zoning to attract retailing. We find that total retail employment is not significantly affected by local sales tax rates, but employment in big box and anchor stores is higher significantly in jurisdictions with h...
Bankruptcy is the legal process by which the debts of firms, individuals, and occasionally governments in financial distress are resolved. Bankruptcy law always includes three components. First, it provides a collective framework for simultaneously resolving all debts of the bankrupt entity, regardless of when they are due. Second, it provides rule...
Homeowners in financial distress can use bankruptcy to avoid defaulting on their mortgages, since filing loosens their budget constraints. But the 2005 bankruptcy reform made bankruptcy less favorable to homeowners and therefore caused mortgage defaults to rise. We test this relationship and find that the reform caused prime and subprime mortgage d...
Personal bankruptcy � lings have risen from 0.3 percent of households per year in 1984 to around 1.35 percent in 1998 and 1999, transforming bankruptcy from a rare occurrence to a routine event. Lenders lost about $39 billion in 1998 due to personal bankruptcy � lings. 1 But economists have little understanding of why households � le for bankruptcy...
We test the hypothesis that local government officials in jurisdictions that have higher local sales taxes are more likely to use fiscal zoning to attract retailing. We find that total retail employment is not significantly affected by local sales tax rates, but employment in big box and anchor stores is significantly increased in jurisdictions whe...
This paper argues that the U.S. bankruptcy reform of 2005 played an important role in the mortgage crisis and the current recession. When debtors file for bankruptcy, credit card debt and other types of debt are discharged - thus loosening debtors' budget constraints. Homeowners in financial distress can therefore use bankruptcy to avoid losing the...
This paper argues that the U.S. bankruptcy reform of 2005 played an important role in the mortgage crisis and the current recession. When debtors file for bankruptcy, credit card debt and other types of debt are discharged—thus loosening debtors’ budget constraints. Homeowners in financial distress can therefore use bankruptcy to avoid losing their...
In this paper we examine the relationship between homeowners’ bankruptcy decisions and their mortgage default decisions and the relationship between homeowners’ bankruptcy decisions and lenders’ decisions to foreclose. In theory, both relationships could be either substitutes or complements. Bankruptcy and default tend to be substitutes because hom...
This paper discusses four bankruptcy-related policy issues. First, what is the economic rationale for having a bankruptcy
procedure at all and what defines an economically efficient bankruptcy procedure? Second, why did the number of U.S. bankruptcy
filings increase so dramatically between 1980 and 2005? Third, a major bankruptcy reform went into e...
Before 2005 bankruptcy reform, debtors could file for bankruptcy and have their unsecured debt discharged in Chapter 7 without losing their homes, as long as their home equity was less than their state’s homestead exemption. Chapter 7 bankruptcy thus made it easier for financially distressed homeowners to meet their mortgage payments and keep their...
This paper examines how filing for bankruptcy under Chapter 13 helps financially distressed debtors save their homes. Filing under Chapter 13 stops lenders from foreclosing and gives debtors extra time to repay mortgage arrears, but does not reduce the total amount owed. We develop a model of debtors' decisions to default on their mortgages and fil...
Bankruptcy is the legal process whereby financially distressed firms, individuals, and occasionally governments resolve their debts. The bankruptcy process for firms plays a central role in economics, because competition tends to drive inefficient firms out of business, thereby raising the average efficiency level of those remaining. Bankruptcy als...
From 1980 to 2004, the number of personal bankruptcy filings in the United States increased more than five-fold, from 288,000 to 1.5 million per year. By 2004, more Americans were filing for bankruptcy each year than were graduating from college, getting divorced, or being diagnosed with cancer. In 2005, the Bankruptcy Abuse Prevention and Consumer...
Prior to the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005, United States bankruptcy law provided a number of different mechanisms designed to both facilitate credit markets and provide some measure of consumption insurance. The interplay between chapter 7 and chapter 13 discharge procedures in particular...
From 1980 to 2004, the number of personal bankruptcy filings in the United States increased more than five-fold, from 288,000 to 1.5 million per year. Lenders responded to the high filing rate with a major lobbying campaign that led to the adoption in 2005 of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), which made bankruptc...
This paper examines how forum shopping and procedural innovations affect the outcomes of asbestos trials using a new data set of all asbestos trials from 1987 to 2003. When lawsuits are filed in six particularly favorable jurisdictions, plaintiffs’ expected returns from trial are found to increase by $800,000 to nearly $4 million. The procedural in...
ABSTRACT : This paper looks at how well Finland performs in high growth entrepreneurship and uses data from the Global Entrepreneurship monitor to benchmark Finland against other European countries. It is found that Finland’s prevalence rate of high growth entrepreneurial activity lags significantly behind most of its European and all of its Scandi...
Brookings-Wharton Papers on Urban Affairs 2005 (2005) 59-97
In 2003 financier warren Buffett announced that he paid property taxes of $14,410 (or 2.9 percent) on his $500,000 home in Omaha, Nebraska, but paid only $2,264 (or 0.056 percent) on his $4 million California home. Although Buffett is known as an astute investor, his low California propert...
Bankruptcy is the legal process whereby financially distressed firms, individuals, and occasionally governments resolve their debts. The bankruptcy process for firms plays a central role in economics, because competition drives inefficient firms out of business, thereby raising the average efficiency level of those remaining. The main economic func...
How might society ensure the allocation of credit to those who lack meaningful collateral? Two very different options that have each been pursued by a variety of societies through time and space are (i) relatively harsh penalties for default and, more recently, (ii) loan guarantee programs that allow borrowers to default subject to moderate consequ...
Drivers have been running an "arms race" on American roads by buying increasingly large vehicles such as sport utility vehicles and light trucks. But large vehicles pose an increased danger to occupants of smaller vehicles and to pedestrians, bicyclists, and motorcyclists. This paper measures both the internal effect of large vehicles on their own...
Drivers have been running an "arms race" on American roads by buying increasingly large vehicles such as SUVs and light trucks. An important reason for the popularity of large vehicles is that families view them as providing better protection to their occupants if a crash occurs. But when families drive large vehicles, they pose an increased danger...
This paper examines the divergence of interest between universities and state governments concerning standards for admitting in-state versus out-of-state students. We find that public universities set lower minimum admission standards for in-state than out-of-state applicants, presumably in response to state pressure, while private universities tre...
Is there a fair way for policymakers to free the American economy from the specter of never-ending asbestos litigation? Even though the number of cancer deaths attributed to asbestos exposure has been dropping since 1992, some 80 firms linked to asbestos production and use have gone bankrupt, and some $54 billion has been paid out in compensation t...
We investigate how personal bankruptcy law affects small firms' access to credit. When a firm is unincorporated, its debts are personal liabilities of the firm's owner, so that lending to the firm is legally equivalent to lending to its owner. If the firm fails, the owner has an incentive to file for personal bankruptcy, since the firm's debts will...
Asbestos was once referred to as a miracle mineral' for its ability to withstand heat and it was used in thousands of products. But exposure to asbestos causes cancer and other diseases. As of the beginning of 2001, 600,000 individuals had filed lawsuits for asbestos-related diseases against more than 6,000 defendants. 85 firms have filed for bankr...
The U.S. personal bankruptcy system functions as a bankruptcy system for small businesses as well as consumers, because debts of noncorporate firms are personal liabilities of the firms' owners. If the firm fails, the owner has an incentive to file for bankruptcy, since both business debts and the owner's personal debts will be discharged. In bankr...
The number of asbestos personal injury claims filed each year is in the hundreds of thousands and has been increasing rather than decreasing over time, even though asbestos stopped being used in the early 1970's. Eighty firms have filed for bankruptcy due to asbestos liabilities including 30 filings since the beginning of 2000. This paper examines...
Drivers have been running an 'arms race' on American roads by buying increasingly heavy vehicles such as SUVs, vans and light trucks. Families view large vehicles as providing better protection to their own occupants if a crash occurs, but these vehicles pose an increased danger to occupants of smaller vehicles and to pedestrians and bicyclists. Th...
During the 1940's to the 1970's, asbestos was widely used for its fire-retardant capabilities in workplaces, schools and homes. Breathing asbestos fibers into the lungs can cause a variety of diseases, ranging from scarring of the lungs with little or no disability to diseases such as mesothelioma that are usually fatal. At least 500,000 individual...
SHOULD THERE BE a sovereign bankruptcy procedure for countries in financial distress? This paper explores the use of U.S. bankruptcy law as a model for a sovereign bankruptcy procedure and asks whether adoption of such a procedure would lead to a more orderly process of sovereign debt restructuring. It assumes that a quick and orderly debt restruct...
This article compares incentives and efficiency under the pure tort system (the comparative negligence rule) to those under pure and mixed no-fault systems. Under no-fault systems, drivers are allowed to opt out of no-fault and file lawsuits if their damages exceed a certain threshold. We find that no single liability system always dominates on eff...
Congress is again attempting to reform federal bankruptcy law by making bankruptcy less favorable for households whose incomes are above the median level. Whatever the merits of that legislation, it would have a negative impact on small business and on U.S. workers who receive their income from such businesses. Among the proposed reforms are limits...
This report documents preliminary findings of an ongoing study conducted by the RAND Institute for Civil Justice. It has been peer-reviewed but has not been formally edited. RAND is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND’s publications do not necessarily reflect the opinions or polic...
The first section of this article briefly describes bankruptcy procedures in the United States and other countries. The second section describes some of the important economic issues and tradeoffs in bankruptcy.
This paper investigates the relationship between bankruptcy exemptions and the availability of credit for mortgage and home improvement loans. We develop a combined model of debtors' decisions to file for bankruptcy and to default on their mortgages and show that the theory predicts positive relationships between both the homestead and personal pro...
We investigate a new approach to the reform of U.S. personal bankruptcy law in which Chapters 7 and 13 would be combined. The proposed reform obliges debtors in bankruptcy to use part of both their wealth and their future earnings to repay debt and therefore bases the obligation to repay in bankruptcy on debtors' ability to pay from both sources. A...
This chapter discusses theoretical and applied research in urban economics on decentralized cities, i.e., cities in which employment is not restricted to the central business district. The first section discusses informally the incentives that firms face to suburbanize. The next section summarizes the theoretical literature on decentralized cities,...
this paper, we use new data from the Panel Study of Income Dynamics which includes information on bankruptcy filings to estimate a model of households' bankruptcy decisions.
This article first examines the economic justification for having a personal bankruptcy procedure at all. I argue that it is economically worthwhile to have a bankruptcy procedure, but that costs rise more quickly than benefits as the exemption level increases. Thus the bankruptcy exemption level should not be too high. Next, the article explores v...
This article rst examines the economic justication for having a personal bankruptcy procedure at all. I argue that it is economically worthwhile to have a bankruptcy pro- cedure, but that costs rise more quickly than benets as the exemption level increases.
A much higher fraction of U.S. households would benefit financially from bankruptcy than actually file. While the current bankruptcy filing rate is about 1% of households each year, I calculate that at least 15% of households would benefit financially from filing and the actual figure would be several times higher if most households plan in advance...
How might society ensure the allocation of credit to those who lack meaningful collateral? Two very different options that have each been pursued by a variety of societies through time and space are (i) relatively harsh penalties for default and, more recently, (ii) loan guarantee programs that allow borrowers to default subject to moderate consequ...
This paper examines how personal bankruptcy and bankruptcy exemptions affect the supply and demand for credit. While generous state-level bankruptcy exemptions are probably viewed by most policymakers as benefiting less-well-off borrowers, the authors' results using data from the 1983 Survey of Consumer Finances suggest that they increase the amoun...
Both Britain and France have adopted new bankruptcy/insolvency laws since 1985 and a new bankruptcy law has also been proposed in Germany, although not yet adopted. In all three countries, a major purpose of the new laws is to shift the focus of bankruptcy law away from exclusively protecting creditors' interests and toward a balance between protec...
This collection is the first comprehensive selection of readings focusing on corporate bankruptcy. Its main purpose is to explore the nature and efficiency of corporate reorganisation using interdisciplinary approaches drawn from law, economics, business, and finance. Substantive areas covered include the role of credit, creditors' implicit bargain...
Both Britain and France have adopted new bankruptcy/ insolvency laws since 1985 and a new bankruptcy law has also been proposed in Germany. Bankruptcy laws in the three European countries have traditionally been oriented toward liquidation, but the new laws move in the direction of allowing reorganization in some circumstances. This paper has sever...
In this paper I estimate the strength of medical providers' incentive to avoid negligent medical care, taking account of the facts that many victims of medical malpractice do not file claims, many nonvictims do file claims, legal costs are high, and the legal system makes errors. Despite these problems, the negligence system creates a strong financ...
This article uses a game theoretic model of Chapter 11 bankruptcy and out-of-court debt restructuring to evaluate the economic efficiency of U.S. bankruptcy procedures. The model assumes that there are two types of failing firms: economically inefficient firms that should liquidate and economically efficient firms that should be saved. From an effi...
This paper presents a game theoretic model that explains why Type I error may occur in bankruptcy.
In this study we examine the experience of a single large hospital with an informal pre-litigation "complaint" process that resolves some cases outside of the legal system. The empirical results are generally consistent with an information structure where patients are poorly informed about the quality of medical care and the hospital does not know...
An urban simulation model is developed in which there are multiple household types: two-worker households, traditional households, and female-headed households, and multiple employment locations: a CBD and two subcenters. Female workers are assumed to have lower wages. Labor force participation and choice of job and residential locations are endoge...
Published in: The Journal of Law, Economics & Organization 10/2, 1994, pp. 268-295
New data on medical malpractice claims against a single hospital in which a direct measure of the quality of medical care is available are used to investigate the roles of the negligence rule and incomplete information in the dispute settlement process in medical malpractice. We find that the quality of medical care (negligence) is an extremely imp...
In this paper, a simulation model of commuting behavior in a metropolitan area with decentralized employment and congestion is developed. The model is used to explore the linkage between the dispersed land use patterns in U.S. cities and long commuting journeys which cause congestion and air pollution. The results show that increasing the number of...
Scholars in the field of law and economics have developed an extensive theoretical literature on the effects of liability rules in accident law, but have done little testing of their theoretical models. In this article, I develop an empirically testable model of the incentives for injurers and victims to avoid accidents under both the older contrib...
Economic theory suggests that bankruptcy should serve as a screening process designed to eliminate only those firms that are economically inefficient and whose resources could be better used in some other activity. However, firms typically file for bankruptcy voluntarily. When they do, creditors are not all repaid in full and large redistributional...
This paper explores residential and job location patterns and commuting behavior in a monocentric urban model with decentralized employment. We show that, in some cases, identical households choose different residential rings depending on their workers' job locations. This means that high-income households whose workers work near the central busine...
This paper formulates and estimates an economic model of landlord housing abandonment, using New York City data. A major focus of the study is to investigate the importance of property taxes in the abandonment decision, as opposed to such factors as the types of buildings or the characteristics of households occupying the neighborhood. There are tw...
BANKRUPTCY COSTS are the deadweight economic costs of firms going bankrupt. They include both ex post bankruptcy costs incurred after a firm's bankruptcy filing, such as transactions costs, and ex ante bankruptcy costs incurred before the filing, such as those resulting from creditors' attempts to reduce their losses if bankruptcy occurs and/or man...
Explores for the US case, the efficiency of single and double pollution taxes. Section I presents several pollution taxes and considers their short-run efficiency. Section II considers long- run efficiency of both single and double pollution taxes. Section III discusses whether double taxes are necessary for efficient pollution control, and the rol...
This paper uses a simulation model to investigate the benefits of an urban public project when the size of the system of cities (or regions) in which migration occurs can vary and when moving costs impede migration. The model captures the range of possibilities between the perfectly open and closed city cases. We find that the total number of house...
Gordon Brady starts his paper on fee shifting by examining the legislative history of the Clean Air Act of 1970 that established a private attorneys general (PAG) mechanism for litigation in environmental cases. The act provided that any person could bring a civil action on his own behalf against (1) anyone violating emission standards, including t...
This article analyzes the economic efficiency properties of bankruptcy liquidation rules, including both conventional legal rules and the me-first rule proposed by economists. It also examines the incentives of firms to undertake investment projects when bankruptcy is a possible outcome. The results show that none of the rules leads to private inve...
The paper investigates the relation between willingness-to-pay and change in property value measures of the benefits from an urban air quality improvement or other public policy change. We show that the two measures are not identical even in the open city case, nor does one measure consistently under- or over-estimate the other. The paper also deve...