Academic journal article Journal of Legal, Ethical and Regulatory Issues

Examining State Sponsored Lotteries and Their Effect on Bankruptcy Filing Rates: A Time Series Analysis

Academic journal article Journal of Legal, Ethical and Regulatory Issues

Examining State Sponsored Lotteries and Their Effect on Bankruptcy Filing Rates: A Time Series Analysis

Article excerpt

ABSTRACT

A significant body of research of state-level policies that cause the interstate variation of consumer bankruptcy filing rates is developing. Beyond the commonly tested economic and demographic explanatory variables, the possible impact of other policy choices on consumer bankruptcy filing rates should be examined. One such policy is the implementation of a lottery. To date there is very limited research, empirical or otherwise, examining the relationship between a lottery and a state's consumer bankruptcy filing rate. Prior research examining this relationship has yielded mixed results. This study is the first to utilize a time-series regression design to analyze the impact of enacting the lottery on a state's consumer bankruptcy filing rate. The primary research question in this study is as follows: What impact, if any, does the presence of a lottery have on a state's consumer bankruptcy filing rate? Prior findings of no statistically significant relationship between a lottery and a state's consumer Chapter 7 filing rate were confirmed. However, mixed results were found regarding the relationship between a lottery and a state's Chapter 13 filing rate, as well as a lottery and the total percentage of Chapter 7 consumer filings. Future research and potential policy implications are suggested.

INTRODUCTION

For the last quarter of a century, a generation of scholars has studied bankruptcy and the causes of the increasing consumer bankruptcy rate, particularly the dramatic increases in the mid1990s. A primary area of focus has been on Chapters 7 and 13 consumer bankruptcies since these are the primary bankruptcy options used by consumer debtors (Wang & White, 2000), and it is filings under these two chapters which have dramatically increased in recent years (Landry & Yarbrough, 2007). Chapter 7 is commonly referred to as liquidation or straight bankruptcy in which the debtor obtains a discharge of most unsecured debts. Chapter 13 is often called a wage earners plan because the debtor usually funds a repayment plan to creditors with disposable income and receives a discharge after completion of the plan (Skeel, 2001).

A significant body of empirical research has developed on the causes of consumer bankruptcy, particularly when compared to the body of empirical research on other areas of the law (Boyes & Faith, 1986; Dixon & Settlage, 1998; Travis, 1999; Sullivan, Warren & Westbrook, 1989; Sullivan, Warren & Westbrook, 2000). Despite the progress in empirical analysis of the causes of consumer bankruptcy, there are still gaps in the research, highlighted by major areas of disagreement on the causal factors leading to increasing consumer bankruptcy filing rates (Warren, Westbrook, & Sullivan, 2006). With the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (Public Law 109-8, 2005), which was designed to limit the number of consumer filings (Lawless, 2007), continued research on the causal factors leading to bankruptcy is needed.

As empirical bankruptcy research evolves, scholars should attempt to address gaps in prior research and further examine areas of disagreement. Beyond the commonly tested causal relationships, the possible impact of other policy choices at the state and federal level on consumer bankruptcy filing rates should be empirically tested (Porter, 2006). One such policy is the implementation of a lottery. To date there is very limited research, empirical or otherwise, examining the relationship between the existence of a lottery and a state's consumer bankruptcy filing rate. Prior research examining this relationship has yielded mixed results (Edmiston, 2006; Landry, 2006). In light of the increasing number of states with a lottery (Freund & Morris, 2005) and wide-variation is state-level consumer bankruptcy filing rates (Weiss, Bhandari, & Robins, 2001), further research is needed. This study is unique in that it is the only known study to date that utilizes a time-series regression design to analyze the impact of enacting a lottery on a state's consumer bankruptcy filing rate. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.