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Imperfect Credit Markets and Crime

Author

Listed:
  • Baumann Florian

    (Center for Advanced Studies in Law and Economics, University of Bonn, Adenauerallee 24–42, 53113 Bonn, Germany)

  • Friehe Tim

    (Public Economics Group, University of Marburg, Am Plan 2, 35037 Marburg, Germany)

Abstract

This 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.

Suggested Citation

  • Baumann Florian & Friehe Tim, 2017. "Imperfect Credit Markets and Crime," Review of Law & Economics, De Gruyter, vol. 13(2), pages 1-15, July.
    • Handle: RePEc:bpj:rlecon:v:13:y:2017:i:2:p:15:n:4
    DOI: 10.1515/rle-2015-0011
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    References listed on IDEAS

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    1. Raphael, Steven & Winter-Ember, Rudolf, 2001. "Identifying the Effect of Unemployment on Crime," Journal of Law and Economics, University of Chicago Press, vol. 44(1), pages 259-283, April.
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    3. C. Fritz Foley, 2011. "Welfare Payments and Crime," The Review of Economics and Statistics, MIT Press, vol. 93(1), pages 97-112, February.
    4. Jean Tirole, 2006. "The Theory of Corporate Finance," Post-Print hal-00173191, HAL.
    5. Raphael, Steven & WINTER-EBMER, RUDOLF, 1998. "Identifying the Effect of Unemployment on Crime," University of California at San Diego, Economics Working Paper Series qt5hb4h56g, Department of Economics, UC San Diego.
    6. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    7. Bester, Helmut, 1985. "Screening vs. Rationing in Credit Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 75(4), pages 850-855, September.
    8. Mark J. Garmaise & Tobias J. Moskowitz, 2006. "Bank Mergers and Crime: The Real and Social Effects of Credit Market Competition," Journal of Finance, American Finance Association, vol. 61(2), pages 495-538, April.
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    Citations

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    Cited by:

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    2. Angelo Castaldo & Giuliana De Luca & Berardino Barile, 2021. "Does Initial Access To Bank Loans Predict Start‐Ups' Future Default Probability? Evidence From Italy," Contemporary Economic Policy, Western Economic Association International, vol. 39(1), pages 83-106, January.
    3. Pengfei Jia & King Yoong Lim, 2021. "The stabilization role of police spending in a neo‐Keynesian economy with credit market imperfections," Scottish Journal of Political Economy, Scottish Economic Society, vol. 68(1), pages 103-125, February.
    4. King Yoong Lim & Pengfei Jia, 2019. "Police spending and economic stabilization in a monetary economy with crime and differential human capital," NBS Discussion Papers in Economics 2019/02, Economics, Nottingham Business School, Nottingham Trent University.

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    More about this item

    Keywords

    credit market; crime; public policy;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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