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File name: SSRN-id1348625. ; Size: 1251K
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Payday Lenders: Heroes or Villains?
Adair Morse
University of California, Berkeley - Haas School of Business; University of Chicago - Booth School of Business
January 2009
Abstract:
I ask whether access to high-interest credit (payday loans) exacerbates or mitigates individual financial distress. Using natural disasters as an exogenous shock, I apply a propensity score matched, triple difference specification to identify a causal relationship between access-to-credit and welfare. I find that California foreclosures increase after disasters, but the existence of payday lenders mitigates half of the distress impact (1.2 foreclosures per 1,000 homes). Lenders also mitigate 2.67 larcenies per 1,000 households with no effect on burglaries or vehicle thefts. My methodology demonstrates that my results apply to ordinary personal emergencies, with the caveat that it may be that not all payday loan customers borrow for emergencies.
Number of Pages in PDF File: 42
Keywords: payday lending, payday loans, natural disasters, triple differencing
JEL Classification: G23, D12, E21, R20
working papers series
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Date posted: February 19, 2009
; Last revised: February 25, 2009
Suggested CitationMorse, Adair, Payday Lenders: Heroes or Villains? (January 2009). Available at SSRN: http://ssrn.com/abstract=1344397 or http://dx.doi.org/10.2139/ssrn.1344397
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