Women’s Access to Credit Increases Women in Bankruptcy: Evidence From Maryland Since 1940
Little is known about women’s use of consumer bankruptcy in the US before 1980. We use new data from Maryland to show that women who petitioned for bankruptcy without a spouse were twice as common in the 1970s as they were in the 1950s and 1960s. We explore the extent to which the growing supply of credit to women explains their growing representation in bankruptcy. To do this, we examine the effect of a 1974 federal law that barred sex discrimination in lending, increasing the supply of credit to women relative to men. After the law, the probability that a bankrupt was a woman was 30 percentage points higher. Additionally, while the number of creditors reported by women filers grew to match men’s, the amount of debt female filers owed did not grow relative to male filers. Together these results imply that the law increased the supply of credit to women on the extensive margin, that is, it increased the number of women who received credit. The patterns suggest that earlier low rates of bankruptcy among women were largely a result of the low supply of credit to them.