NDLI: Getting Out of Debt: Garnishment of Wage in Whose Interest?

Content Provider	Springer Nature Link
Author	Zaborowski, Christoph Zweifel, Peter
Copyright Year	1999
Abstract	Garnishment of wage as a way for creditors to enforce payment by unwilling or insolvent debtors, while very common in Germany and Switzerland, is not very successful. Based on a dynamic model of debtor behaviour, this paper explores two alternatives of reform. One is to reduce the rate of garnishment, which at present amounts to 100 percent of the wage income exceeding a defined subsistence level, thus probably destroying incentives to work. According to model simulations, reducing the rate of garnishment is likely to result in an increase of labour supply but a decrease of garnishment revenue per period. Second, the introduction of a debt release as it exists in the United States would have an ambiguous effect on labour supply. While providing debtors with a fresh start, it would result a partial loss for creditors. A Pareto improvement thus does not seem to be possible. When taxpayers as an involved third party are taken into account, however, a potential Pareto improvement appears attainable through debt release.
Starting Page	207
Ending Page	230
Page Count	24
File Format	PDF
ISSN	09291261
Journal	European Journal of Law and Economics
Volume Number	8
Issue Number	3
e-ISSN	15729990
Language	English
Publisher	Kluwer Academic Publishers
Publisher Date	1999-01-01
Publisher Place	Boston
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	Commercial Law Public Finance & Economics Political Science
Content Type	Text
Resource Type	Article
Subject	Business and International Management Law Economics and Econometrics

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1	Ministry of Education (GoI), Department of Higher Education	Sanctioning Authority	https://www.education.gov.in/ict-initiatives
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