In our previous paper we built a general equilibrium model of default and punishment in which equilibrium always exists and endogenously determines asset promises, penalties, and sales constraints. In this paper we interpret the endogenous sales constraints as equilibrium signals. By...

In U.S. data, income interruptions, the receipt of public insurance, and the incidence of personal bankruptcy are all closely related. The central contribution of this paper is to evaluate both bankruptcy protection and public insurance in a unified setting where each program alters incentives...

We propose an extension of the incomplete markets general equilibrium model with production to situations in which firms default. In the model, firms are assumed to be owned by a single individual whose roles as entrepreneur and consumer are anonymous. Assets are exogenously collateralised and...

This paper studies the optimal determination of bankruptcy exemptions for risk averse borrowers who use unsecured contracts but have the possibility of defaulting. I show that, in a large class of economies, knowledge of four variables is sufficient to determine whether a bankruptcy exemption...