>You have data on US bankruptcy rates "at the county level"? Is that by
county
>where filed? Are there any data that allow you to tell how much credit
card
>spending and defaulting there is by consumers (end users) compared to
>business? Defaulting by business would not seem to be in the interest of
>capital in the same way it can be for individuals.
This comes from a paper presented at a conference which our economist attended, and buzzed on to me because it was relevant to banks. I don't have the underlying data, but could probably dig out the paper (it's somewhere in the Cretaceous period of my desk). The author was studying personal bankruptcy filings under Chapter something or other (forget), by county of filing. Credit cards were increasing as a proportion of the debt at bankruptcy, but most of it was still mortgage-related.
>When you say the correlation has "broken down", what does that mean? How
many
>years data do you have to establish the correlation and how good is it?
There
>wouldn't seem to be much of a direct relationship between poor folks in
the
>reserve army and bankruptcies. In this context, unemployment rates are
not a
>very good proxy for either disposable income or wealth are they,
particularly
>as the disparity of income and wealth between rich and poor grows by leaps
and
>bounds?
>RO
It was cross-sectional, for the year 1998 -- the guy had regressed county-level bankruptcy filings on county level unemployment rates for the x{bignum} counties of the USA. He might have had a few lags or some time structure but I don't think so. Typically, you would expect a high r-squared factor for this sort of regression, as variations in unemployment rates would explain a lot of the variation in default rates. However, in this guy's study, the r-squared value was tiny. This was startling -- the idea that unemployment (as a proxy for inability to play) is no longer a significant factor in explaining default rates means that they must now be caused by something else (assuming that "something else" is proably willingness to pay.).
I disagree that the unemployment rate is a poor proxy for ability to repay debt -- I think it's a very good proxy, which is why your employment situation is one of the main things a banker asks about when making a personal loan. I sort of take your point about wealth inequality, but this is by the by -- declaring bankruptcy is prety much a binary choice -- either your income is enough to make payments on your debts or it isn't.
Another result of the study was that you could find one single variable which was a very good predictor of bankruptcy rates in counties of New Jersey. Anyone care to guess?
dd
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