The effect of payday lending restrictions on liquor sales

Harold E. Cuffe and Christopher Gibbs

Journal of Banking & Finance, 2017, vol. 85, issue C, 132-145

Abstract: We exploit a change in lending laws to estimate the causal effect of restricting access to payday loans on liquor sales. Leveraging lender- and liquor store-level data, we find that the changes reduce sales, with the largest decreases at stores located nearest to payday lenders. By focusing on states with state-run liquor monopolies, we account for endogenous supply-side variables that are typically unobserved. Further analysis of consumer-level data indicates that the lending restrictions reduce alcohol expenditures without affecting total household spending. This is consistent with a distinct relationship between payday lending access and alcohol purchases, and suggests that present biased motivations underlie some loan use. The finding is significant because it shows that payday loan access is associated with unproductive borrowing, and directly links payday loan access to public health issues.

Keywords: Payday lending; Consumer credit; Alcohol (search for similar items in EconPapers)
JEL-codes: D18 G23 H70 I12 K23 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426617301929
Full text for ScienceDirect subscribers only

Related works:
Working Paper: The effect of payday lending restrictions on liquor sales (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:85:y:2017:i:c:p:132-145

DOI: 10.1016/j.jbankfin.2017.08.005

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().