In Defense of Usury Laws

Giuseppe Coco and David de Meza

Journal of Money, Credit and Banking, 2009, vol. 41, issue 8, 1691-1703

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. Copyright (c) 2009 The Ohio State University.

Date: 2009
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Working Paper: In defence of usury laws (2001)
Working Paper: In Defence of Usury Laws (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:mcb:jmoncb:v:41:y:2009:i:8:p:1691-1703

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