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Payday Lenders: Heroes or Villains?

Adair Morse
University of Chicago - Booth School of Business

February 2007

2nd Annual Conference on Empirical Legal Studies Paper

Abstract:
I study the effect that the availability of exceptionally high-interest consumer loans (payday loans) has on individual welfare by using natural disasters as an exogenous shock to communities' financial condition. Utilizing a propensity score matched, triple difference approach, I find that communities with payday lenders show greater resiliency to natural disasters. For three of the four welfare measures considered - foreclosures, births, and alcohol and drug treatment admissions, - the estimates suggest that payday lending enhances the welfare of communities. I discuss whether this effect is limited to individuals facing personal disasters or applies in general.

Keywords: Payday Lending, Consumer Finance, Temptation Consumption, Distress Finance

JEL Classifications: D12, K23, G28, G23

Working Paper Series

Date posted: July 10, 2007 ; Last revised: January 29, 2008

Suggested Citation

Morse, Adair, Payday Lenders: Heroes or Villains? (February 2007). 2nd Annual Conference on Empirical Legal Studies Paper. Available at SSRN: http://ssrn.com/abstract=999408

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Contact Information

Adair Morse (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-834-1615 (Phone)

HOME PAGE: http://www.chicagogsb.edu/fac/adair.morse