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The role of path dependence in the development of US bankruptcy law, 1880–1938

Published online by Cambridge University Press:  01 August 2007

BRADLEY A. HANSEN  and
MARY ESCHELBACH HANSEN
BRADLEY A. HANSEN
Affiliation:
Department of Economics, University of Mary Washington, Virginia, USA. Email: bhansen@umw.edu
MARY ESCHELBACH HANSEN
Affiliation:
Department of Economics, American University, District of Columbia, USA
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Abstract:

We illustrate mechanisms that can give rise to path dependence in legislation. Specifically, we show how debtor-friendly bankruptcy law arose in the United States as a result of a path dependent process. The 1898 Bankruptcy Act was not regarded as debtor-friendly at the time of its enactment, but the enactment of the law gave rise to changes in interest groups, changes in beliefs about the purpose of bankruptcy law, and changes in the Democratic Party's position on bankruptcy that set the United States on a path to debtor-friendly bankruptcy law. An analysis of the path dependence of bankruptcy law produces an interpretation that is more consistent with the evidence than the conventional interpretation that debtor-friendliness in bankruptcy law began with political compromises to obtain the 1898 Bankruptcy Act.

Type
Research Article
Information
Journal of Institutional Economics , Volume 3 , Issue 2 , August 2007 , pp. 203 - 225
Copyright
Copyright © The JOIE Foundation 2007

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