Personal Bankruptcy Law: An Economic Analysis

In the light of increasing household debt, several European countries amended regulation for consumer debt release. These regulations affect consumer behavior, in particular with respect to labor supply, causing in an extreme case a heavily indebted consumer to discontinue efforts. Yet effects on the effort choice may be observed even prior to distress.

Eva-Maria Steiger analyzes the influence of the bankruptcy regulation on a consumer's effort choice. She classifies the mechanisms trigge...