1. New Insights in the Determinants of Regional Variation in Bankruptcy Filing Rates Kelly D. Edmiston Senior Economist, FRB Kansas City North American Meetings, RSAI November 10, 2005 Las Vegas, NV

2. Personal Bankruptcies in the U.S.

3. Bankruptcy Filing Rates by County, U.S., 2000

4. November 10, 2005K. Edmiston, Federal Reserve Bank of Kansas City4 Focus homestead exemptions social stigma legal gambling wage garnishment

5. November 10, 2005K. Edmiston, Federal Reserve Bank of Kansas City5 Homestead Exemptions V – E H allocated to unsecured debts foreclosure Protection is afforded to all types of assets Offers consumption insurance / lowers bankruptcy filing costs

6. November 10, 2005K. Edmiston, Federal Reserve Bank of Kansas City6 Some high asset individuals move to high exemption states to convert assets Exemptions that are both higher and lower than federal lead to more bankruptcies Effect on bankruptcies is negative Effect on bankruptcies is positive Positive for 7 filings and negative for 13 filings Homestead Exemptions: Empirical Evidence

7. November 10, 2005K. Edmiston, Federal Reserve Bank of Kansas City7 Two approaches to measuring the effect of homestead exemptions (1) Least Squares with White’s (1980) Correction: (2) Two-Stage Model to Account of Endogeneity

8. Stage 1 Table 3: Results, Homestead Exemptions Variable Parameter Value (t-statistic) Variable Parameter Value (t-statistic) Intercept - 7,796,626 * (- 1.733) Percent White - 5,853 * (- 1.844) Poverty Rate - 140,452 *** (- 2.891) Average Family Size 1,770,668 *** (3.045) Median House Value - 8.062 *** (- 3.059) Household Median Income - 32.52 * (- 1.905) Wage Not Subject to Garnishment - 4,577 ** (- 2.166) Households with Public Assistance - 238,177 ** (- 2.644) Percent of Population that is Male 122,891 * (1.811) Owner-Occupany Rate - 21,184 * (- 1.954) Median Age 76,621 *** (2.813) Percent GOP - 14,540 (- 1.406) Adjusted R 2 0.2063No. Observations51 ***, **, and * indicates statistical significance at the 1, 5, and 10 percent levels, respectively.

9. Stage 2 Bootstrapping Estimate by least squares: Generate: Sample:n observations from X, with replacement Estimate: Evaluate:

10. November 10, 2005K. Edmiston, Federal Reserve Bank of Kansas City10 Social Stigma Previous approaches age (and age squared) geography (own state for individual) Innovations on previous approaches entire age distribution LS with regional dummies and SAR New approach religious adherence

11. Age Distribution 1

12. Age Distribution 2

13. Estimation of Geographic Factors and Results Least Squares with Regional Dummy Variables SAR

14. Religious Adherence Religion Parameter (t-statistic) Religion Parameter (t-statistic) Christian – Catholic 0.019 (0.260) Judaism 1.976 ** (2.527) Christian – Protestant 0.141 ** (2.038) Eastern Religions - 13.72 *** (- 3.498) Christian – Orthodox 0.500 (0.356) Islam - 4.809 ** (- 2.564) Christian – LDS 0.129 (0.972) Unitarian Universalist - 38.42 *** (- 4.231)

15. Wage Garnishment

16. Gambling in the United States, 2000

17. Gambling Results Variable Parameter Value (t-statistic) Minimum Distance to a Casino - 0.043 *** (- 5.777) Lottery - 2.814 (- 1.195) Card Rooms 10.78 *** (2.616) Race Tracks - 13.67 *** (- 4.835)

18. Kelly D. Edmiston Senior Economist Community Affairs Department Federal Reserve Bank of Kansas City 925 Grand Boulevard Kansas City, MO 64198-0001 Tel: (816) 881-2004 Fax: (816) 881-2704 E-Mail: Kelly.Edmiston@kc.frb.org