NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Political Economy of Financial Regulation: Evidence from U.S. State Usury Laws in the 19th Century

Efraim Benmelech, Tobias J. Moskowitz

NBER Working Paper No. 12851
Issued in January 2007
NBER Program(s):   CF   DAE

We investigate the causes and consequences of financial regulation by studying the political economy of U.S. state usury laws in the 19th century. We find evidence that usury laws were binding and enforced and that lending activity was affected by rate ceilings. Exploiting the heterogeneity across states and time in regulation, enforcement, and market conditions, we find that regulation tightens when it is less costly and when it coexists with other economic and political restrictions that exclude certain groups. Furthermore, the same determinants of financial regulation that favor one group (and restrict others) are associated with higher (lower) future economic growth rates. The evidence suggests regulation is the outcome of private interests using the coercive power of the state to extract rents from other groups, highlighting the endogeneity of financial development and growth.

download in pdf format
   (419 K)

email paper

This paper is available as PDF (419 K) or via email.

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w12851

Published: Efraim Benmelech & Tobias J. Moskowitz, 2010. "The Political Economy of Financial Regulation: Evidence from U.S. State Usury Laws in the 19th Century," Journal of Finance, American Finance Association, vol. 65(3), pages 1029-1073, 06.

Users who downloaded this paper also downloaded these:
Rockoff w9742 Prodigals and Projecture: An Economic History of Usury Laws in the United States from Colonial Times to 1900
Bodenhorn w11734 Usury Ceilings, Relationships and Bank Lending Behavior: Evidence from Nineteenth Century
Mitchener w12074 Are Prudential Supervision and Regulation Pillars of Financial Stability? Evidence from the Great Depression
Nakamura w17006 Durable Financial Regulation: Monitoring Financial Instruments as a Counterpart to Regulating Financial Institutions
Kane w6020 Ethical Foundations of Financial Regulation
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us