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The Long-Run Effects of Individual Debt Relief

Gustaf Bruze¹; Alexander Kjær Hilsløv²; Jonas Maibom³

¹ PIREAU (External Researcher Aarhus University) · ² Aarhus University · ³ Aarhus University, CESIfo and IZA

Abstract Individuals with extensive debt may be granted debt relief in court. We provide a comprehensive evaluation of the Danish debt relief program with data from court records linked to nationwide register data. Using event-study methods and quasi-random assignment of applicants to court trustees with varying admission rates, we show that debt relief leads to a large increase in earned income, employment, assets, real estate, secured debt, home ownership, and wealth that persists for more than 25 years after a court ruling. The net transition of workers into employment accounts for two thirds of the increase in earned income.

DOI

10.1162/rest_a_01525

Pages

1-45

Language

en

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