Research
Working Papers
The Consequences of Debt and the Tradeoff of Bankruptcy
(Job market paper)
Bankruptcy is designed as a race-neutral financial fresh start, yet significant racial disparities persist in debt relief outcomes. Black households file for personal bankruptcy at nearly twice their share of the general population and are disproportionately channeled into Chapter 13, a 3-to-5 year repayment plan with only a one-third success rate, despite being largely eligible for the faster, more successful Chapter 7 liquidation. Even after a successful discharge, Black filers exit with more remaining debt than white filers who entered with higher total debt. Black households are also at greater risk of judge-ordered wage garnishment prior to or in lieu of bankruptcy filing, which can tighten a household’s budget constraint and drive bankruptcy filings. This paper asks how do institutional features of the bankruptcy system contribute to racial disparities in debt relief outcomes? and what does this imply for racial wealth inequality over the life cycle? I develop a structural life-cycle model with endogenous bankruptcy chapter choice, default, and repayment with plan dismissal and wage garnishment risk. The model incorporates institutional features including fee structure, repayment plan design, exemption and dischargeability rules, and wage garnishment exposure. These features interact with racial differences in household finances, including differences in liquidity, assets, debt, and income. Using the calibrated model, I evaluate four policy counterfactuals: restructuring attorney and filing fees, allowing modest savings during Chapter 13 repayment, expanding exempt assets and student loan dischargeability, and equalizing wage garnishment exposure across race. Together these experiments quantify how each institutional feature contributes to the racial gap in bankruptcy outcomes and life-cycle wealth.
Racial Differences in Family Transfers: Positive vs Negative Social Tax
Racial differences in intervivos transfers between family members, including differences in timing, persistence, direction, and magnitude, have been considered a significant contributor to the racial wealth gap. Middle and upper-income Black households are more likely than their white counterparts to have extended family members in poverty, leading to what sociologists call the “Black Tax”: successful Black households assume financial responsibility for relatives who more frequently face negative shocks. In this paper, I develop a life-cycle consumption and savings model in which households face idiosyncratic shocks to both intervivos transfers and parental education transfers, and make an endogenous college enrollment decision at age 18. I use data from the Panel Study of Income Dynamics (PSID) and the 2013 Family Rosters and Transfers supplement to calibrate race-specific transfer functions for Black and white households, capturing how the probability and magnitude of parental education support and intervivos transfers vary with age, income, wealth, family background, and education. The model features two channels through which racial differences in family transfers can affect wealth accumulation. The first is a direct channel through differences in the flow of resources given and received over the life cycle. The second is an indirect channel through college enrollment incentives, which are shaped both by differences in parental education transfers and by the expectation of future transfer obligations. To assess the importance of these disparities, I simulate a counterfactual in which Black households receive the same parental education transfers as white households.