Abstract

http://ssrn.com/abstract=959128
 
 

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The Political Economy of Financial Regulation: Evidence from U.S. State Usury Laws in the 19th Century


Tobias J. Moskowitz


University of Chicago - Booth School of Business; AQR Capital; National Bureau of Economic Research (NBER)

Efraim Benmelech


Northwestern University - Kellogg School of Management; National Bureau of Economic Research (NBER)

January 2007

NBER Working Paper No. w12851

Abstract:     
We investigate the causes and consequences of financial regulation by studying the political economy of U.S. state usury laws in the 19th century. We find evidence that usury laws were binding and enforced and that lending activity was affected by rate ceilings. Exploiting the heterogeneity across states and time in regulation, enforcement, and market conditions, we find that regulation tightens when it is less costly and when it coexists with other economic and political restrictions that exclude certain groups. Furthermore, the same determinants of financial regulation that favor one group (and restrict others) are associated with higher (lower) future economic growth rates. The evidence suggests regulation is the outcome of private interests using the coercive power of the state to extract rents from other groups, highlighting the endogeneity of financial development and growth.

Number of Pages in PDF File: 53


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Date posted: January 24, 2007  

Suggested Citation

Moskowitz, Tobias J. and Benmelech, Efraim, The Political Economy of Financial Regulation: Evidence from U.S. State Usury Laws in the 19th Century (January 2007). NBER Working Paper No. w12851. Available at SSRN: http://ssrn.com/abstract=959128

Contact Information

Tobias J. Moskowitz (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-834-2757 (Phone)
773-702-0458 (Fax)

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AQR Capital ( email )
Greenwich, CT
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Efraim Benmelech
Northwestern University - Kellogg School of Management ( email )
Evanston, IL 60208
United States
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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