Peer-to-Peer Lending and Urban Crime

Abstract

This paper investigates the impact of peer-to-peer (P2P) lending on urban crime rates. Our baseline result shows that the entry of P2P platforms significantly reduces crime rates, particularly among adult male offenders and in property-related crime categories. To establish causality, we adopt a difference-indifferences approach that exploits the staggered entry of P2P platforms across counties as an exogenous shock. Our identification strategy suggests a negative causal effect of P2P platform entry on crime rates. Further analysis indicates that this negative effect is more pronounced in counties with fewer bank branches or lower levels of traditional credit supply. Overall, our findings highlight the role of P2P platforms in alleviating credit constraints, promoting financial inclusion, and mitigating economically driven criminal activities.

Keywords: P2P Lending, Urban Crime, Credit Supply