There are many avenues by which parents can help their children succeed in the labor market. For example, a parent can invest in his childos education, he can provide money to defray search costs, or he can endow his child with a genetic code that is more or less suited to the current labor market. Of course, society bears the costs of these intergenerational correlations through reduced mobility; one childos advantage in getting a job is anotheros disadvantage. The intergenerational correlations literature has sought to quantify the importance of these sorts of effects for over a century, both through isolating individual effects and in total. One avenue which has long been mentioned (since at least Becker and Tomes 1979) but remains unquantified is the importance of parents as network members.
The last two decades have seen a massive increase in both consumer credit and personal bankruptcies. Policymakers and academics have attempted to understand the sources of these trends and the causal link between them. As part of this debate, there has been much discussion about whether bankrupt individuals are (or should be) excluded from credit markets, and whether these individuals have gone bankrupt due to demand side factors, such as income and employment shocks, or as part of a general trend of increased credit supply. Gross and Souleles (2002) argue that demand side factors play a more important role than those on the supply side by showing that the changes in default rates are not caused by changes in the risk composition of borrowers.
More recently, Dick and Lehnert (2009) have suggested that increased bankruptcies are a consequence of increased competition in the banking sector. They argue that improved credit scoring algorithms have helped banks compete and have increased lending to riskier households, which has led to a rise in bankruptcies. In this paper, we seek to refine the supply-side story to better understand the consequences of filing for bankruptcy by studying the availability of credit to households post-bankruptcy. Understanding the consequences of filing provides insights into the incentives and determinants to file. This question is important for understanding the implications of the credit card legislation recently signed into law, which limits the penalizing strategies banks have previously used to generate significant income, particularly from riskier borrowers.
Ronald Reagan is nominating former Congressman Barber Conable, the New York Republican, to be the new president of the World Bank. Conable takes over an institution which has strayed far from its. original purpose of promoting private sector growth. however, have enormous power within the organization to reform World Bank operations to make them more effective and more consistent with Reagan's philosophy of aiding the developing world primarily through the private sector.
Conable could, for example, appoint staff committed to fostering market-oriented policies. He should reestablish the sound banking practice that loans are made to encourage growth and development and use the Bank's leverage to'nudge recipient countries toward free market policies. And by opposing a suggested $40 billion increase in the Bank's general capital, Conable could force the Bank to use its resources more effectively.
