JOURNAL ARTICLE
Cite JOURNAL ARTICLE
Style
Format
Why Shylock Can be Efficient A Theory of Usury Contracts
Credit and Capital Markets – Kredit und Kapital, Vol. 35 (2002), Iss. 3 : pp. 381–399
Additional Information
Article Details
Author Details
Donato Masciandaro, Milan
References
-
Basu, K. (1984): Implicit Interest Rates, Usury and Isolation in Backward Agriculture, Cambridge Journal of Economics, vol. 8, n. 2, pp. 145-160.
Google Scholar -
Baudasse, T. (1993): L’opportunite’ du taux d’usure: quelques elements de la literature, Revue d’Economie Financiere, vol. 7, n. 25, pp. 193-208.
Google Scholar -
Bester, H. (1993): The Role of Collateral in a Model of Debt Renegotiation, Journal of Money, Credit and Banking, vol. 25, n. 1, pp. 72-86.
Google Scholar -
Blitz, R./Long, M. (1965): The Economics of Usury Regulation, Journal of Political Economy, vol. 73, December, pp. 608-619.
Google Scholar -
Boyes, W. J. (1982): In Defence of the Downtrodden: Usury Law?, Public Choice, vol. 39, n. 2, pp. 269-276.
Google Scholar
Abstract
In this paper we demonstrate the characteristic of usury contracts in respect to bank loan contracts. Traditionally usury is an inefficient result of credit market failures. On the contrary in our dynamic micro model, usury can be more efficient than the bank loan contract because debt renegotiations are more likely to be implemented, given specific features of the illegal usurer technology and an entrepreneur’s decreasing risk aversion. We also show that a high level of interest rate does not represent a necessary or a sufficient condition for the existence of usury contracts. (JEL K40, K42, K14, G18)