Payday lenders: Heroes or villains?

Adair Morse

Journal of Financial Economics, 2011, vol. 102, issue 1, 28-44

Abstract: Does access to high-interest credit (payday loans) exacerbate or mitigate individual financial distress. Using natural disasters as an exogenous shock, I apply a propensity score-matched, triple-difference specification to identify a causal relation between welfare and access to credit. California foreclosures increase by 4.5 units per 1,000 homes after a natural disaster. The existence of payday lenders mitigates 1.0-1.3 of them, with the caveat that not all payday loans are for emergency distress. Payday lenders also mitigate larcenies (but not burglaries or vehicle thefts). In a placebo test of disasters covered by homeowner insurance, payday lending has no mitigation effect.

Keywords: Payday; lending; Access; to; credit; Natural; disasters; Foreclosures; Welfare (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (150)

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