Imperfect Credit Markets and Crime

2017 ◽  
Vol 13 (2) ◽  
Author(s):  
Florian Baumann ◽  
Tim Friehe
Keyword(s):  
Law Enforcement ◽  
Credit Markets ◽  
Market Equilibrium ◽  
Credit Market ◽  
Information Asymmetries ◽  
Lending Rate ◽  
Criminal Opportunity ◽  
Enforcement Policies

AbstractThis paper analyzes the link between individual crime choices and imperfect credit markets. The study shows that, by affecting the equilibrium lending rate, credit market characteristics such as the mark-up required by lenders or the severity of information asymmetries between lenders and loan applicants influence the extent of crime. For example, higher mark-ups incite more crime when less borrowing makes the criminal opportunity more tempting. Similarly, law enforcement policies may impact on the credit market equilibrium.

Credit Market Equilibrium with Bank Monitoring and Moral Hazard

1993 ◽  
Vol 6 (1) ◽  
pp. 213-232 ◽  
Author(s):  
David Besanko ◽  
George Kanatas
Keyword(s):  
Moral Hazard ◽  
Market Equilibrium ◽  
Credit Market ◽  
Bank Monitoring

International credit market integration in northwestern Europe in the 1670s

2019 ◽  
Vol 26 (2) ◽  
pp. 127-145
Author(s):  
Ling-Fan Li
Keyword(s):  
Exchange Rate ◽  
Transaction Cost ◽  
Financial Market ◽  
Market Integration ◽  
Credit Markets ◽  
Credit Market ◽  
Disruptive Effect ◽  
Speed Of Adjustment ◽  
Financial Market Integration ◽  
International Credit

This article studies the financial market integration in the 1670s by examining the effectiveness of triangular exchange arbitrage. The results suggest that international credit markets based on bills of exchange in northwestern Europe were well integrated and responded to exchange-rate differences quickly. The speed of adjustment, ranging between one and three weeks, accorded with the speed of communication, but the transaction cost associated with exchange arbitrage was much lower than that of shipping bullion. Although warfare had a disruptive effect on exchange arbitrage by increasing transaction cost, markets were resilient in remaining efficient.

scholarly journals Using Experimental Economics to Measure Social Capital and Predict Financial Decisions

2005 ◽  
Vol 95 (5) ◽  
pp. 1688-1699 ◽  
Author(s):  
Dean S Karlan
Keyword(s):  
Social Capital ◽  
Public Goods ◽  
Experimental Economics ◽  
External Validity ◽  
Credit Markets ◽  
Trust Game ◽  
Information Asymmetries ◽  
Group Lending ◽  
Financial Decisions

Questions remain as to whether results from experimental economics are generalizable to real decisions in nonlaboratory settings. Furthermore, questions persist about whether social capital helps mitigate information asymmetries in credit markets. I examine whether behavior in two laboratory games, Trust and a Public Goods, predicts loan repayments to a Peruvian group-lending microfinance program. Since this program relies on social capital to enforce repayment, this tests the external validity of the games. Individuals identified as “trustworthy” by the Trust Game are indeed less likely to default on their loans. No similar support is found for the game's identification of “trusting” individuals.

Turf and Illegal Drug Market Competition between Gangs

2015 ◽  
Vol 15 (4) ◽  
pp. 1507-1548 ◽  
Author(s):  
Alberto J. Naranjo
Keyword(s):  
Law Enforcement ◽  
Community Policing ◽  
Market Competition ◽  
Drug Market ◽  
Illegal Drug ◽  
Local Communities ◽  
Unintended Consequences ◽  
Drug Markets ◽  
Stage Game ◽  
Enforcement Policies

Abstract Street-level illegal drug markets generate much of the violence and intimidation that local communities face nowadays. These markets are mainly driven by territorial gangs who finance their activities through the sale of drugs. Understanding how the existence of both turf and drug market competition may have unintended consequences of law enforcement policies on violence is the main contribution of the paper. We propose a two-stage game-theoretical model where two profit maximizing gangs compete in prices and invest in guns. We find that policies such as traditional or community policing can have different and unexpected effects on the level of violence.

The Marriage Penalty: Women, Property Rights, and Credit Markets in Yucatán, 1850 – 1900

2008 ◽  
Vol 88 (3) ◽  
pp. 427-454
Author(s):  
Juliette Levy
Keyword(s):  
Nineteenth Century ◽  
Property Rights ◽  
Credit Markets ◽  
Credit Market ◽  
Mortgage Market ◽  
Legal Tradition ◽  
Economic Markets ◽  
Marital Property ◽  
Civil Codes ◽  
Property Regimes

Abstract This article addresses how marital property regimes acted as obstacles to the development of the Yucatán credit market. Marriage is a contract, and historically it carries with it significant financial corollaries. Dowries, marital property regimes, and inheritance laws were all designed to support the economic instrument that marriage represented. There are many other ways in which marriage intersects with markets; this article assesses the role of property rights, and specifically, married women’s property rights, in the credit markets of nineteenth-century Yucatán. Using mortgage contracts and probate records recorded by notaries, this article analyzes the participation of women in the local mortgage market, taking into account the legal context in which it developed, and explains how legal tradition and civil codes contributed to the distortions that affected women in the local credit market. This article shows specifically that the analysis of women’s participation in economic markets in the nineteenth century must take their marital status into account, as well as the unequal legal position of husbands and wives under the laws of the time, and concludes that marital property rights, and by extension marriage, played an important and unexpected role in the region’s credit market.

scholarly journals Information Asymmetries in Consumer Credit Markets: Evidence from Payday Lending

2013 ◽  
Vol 5 (4) ◽  
pp. 256-282 ◽  
Author(s):  
Will Dobbie ◽  
Paige Marta Skiba
Keyword(s):  
Moral Hazard ◽  
Adverse Selection ◽  
Regression Discontinuity ◽  
Credit Markets ◽  
Consumer Credit ◽  
Probability Of Default ◽  
Information Asymmetries ◽  
Payday Lending ◽  
Loan Market ◽  
Payday Loans

Information asymmetries are prominent in theory but difficult to estimate. This paper exploits discontinuities in loan eligibility to test for moral hazard and adverse selection in the payday loan market. Regression discontinuity and regression kink approaches suggest that payday borrowers are less likely to default on larger loans. A $50 larger payday loan leads to a 17 to 33 percent drop in the probability of default. Conversely, there is economically and statistically significant adverse selection into larger payday loans when loan eligibility is held constant. Payday borrowers who choose a $50 larger loan are 16 to 47 percent more likely to default. (JEL D14, D82, G21)

Silencing Women's Voices: Nuisance Property Laws and Battered Women

2015 ◽  
Vol 40 (04) ◽  
pp. 908-936 ◽  
Author(s):  
Gretchen Arnold ◽  
Megan Slusser
Keyword(s):  
Domestic Violence ◽  
Law Enforcement ◽  
Battered Women ◽  
Gender Inequality ◽  
Qualitative Data ◽  
Organizational Structures ◽  
Women's Voices ◽  
Law Enforcement Officials ◽  
The Law ◽  
Enforcement Policies

There is little documentation about how nuisance property laws, which fine people for excessive 911 calls, affect victims of domestic violence. In St. Louis, we found that police and prosecutors believe that the law benefits victims of domestic violence by providing them with additional services. By contrast, advocates for domestic violence victims believe that the law undermines battered women's access to housing and discourages them from calling 911. Using qualitative data, we analyze how the organizational structures and dynamics within which each group works give rise to different stocks of working knowledge. We conclude that law enforcement officials are unaware of these harms because women's voices and experiences are marginalized during the enforcement process. This research reveals mechanisms through which law enforcement policies reinforce gender inequality, and illustrates some ways in which gender relations and power come into play in what, on their surface, appear to be gender‐neutral laws.

scholarly journals Promises and pitfalls of digital credit: Empirical evidence from Kenya

PLoS ONE ◽  
2021 ◽  
Vol 16 (7) ◽  
pp. e0255215
Author(s):  
Constantin Johnen ◽  
Martin Parlasca ◽  
Oliver Mußhoff
Keyword(s):  
Developing Countries ◽  
Empirical Evidence ◽  
Empirical Research ◽  
Credit Markets ◽  
Credit Market ◽  
Credit Access ◽  
Representative Data ◽  
Recent Innovation ◽  
Default Rates

Digital credit is a recent innovation that raises hopes of improving credit access in developing countries. However, up until now, empirical research on the extent to which digital credit actually reaches people who are otherwise excluded from conventional credit markets and whether increased credit access is sustainable or threatened by high default and blacklisting rates is very scarce. Using representative data from Kenya, this article shows that digital credit increases borrowing opportunities, including for people less likely to otherwise have credit access in the conventional credit markets. However, we find that digital credit borrowing is also responsible for 90% of all blacklistings, which is partially driven by higher default rates in the digital credit market but also by a higher probability that digital credit defaults lead to blacklisting of the borrower, compared to defaults in other credit markets.

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