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Payday Lenders: Heroes or Villains?

Adair Morse

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER)

January 2009

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

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Date posted: February 19, 2009 ; Last revised: February 25, 2009

Suggested Citation

Morse, Adair, Payday Lenders: Heroes or Villains? (January 2009). Available at SSRN: https://ssrn.com/abstract=1344397 or http://dx.doi.org/10.2139/ssrn.1344397

Contact Information

Adair Morse (Contact Author)
University of California, Berkeley - Haas School of Business ( email )
545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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