In defense of usury laws

Coco, Giuseppe and de Meza, David ORCID: 0000-0002-5638-8310 (2009) In defense of usury laws. Journal of Money, Credit and Banking, 41 (8). pp. 1691-1703. ISSN 0022-2879

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Abstract

Usury law is often criticized by economists for curtailing lending and thus creating deadweight costs. This paper shows that if moral hazard leads to credit rationing, a just-binding usury law creates a deadweight gain. This property also holds in most market-clearing equilibria. Independent of social insurance benefits, or curbing present-biased preferences, interest rate caps have merit.

Item Type:	Article
Official URL:	http://onlinelibrary.wiley.com/journal/10.1111/(IS...
Additional Information:	© 2009 The Ohio State University
Divisions:	Management
Subjects:	H Social Sciences > HB Economic Theory
Date Deposited:	10 May 2011 15:48
Last Modified:	11 Dec 2024 23:35
URI:	http://eprints.lse.ac.uk/id/eprint/36071

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