Imperfect Credit Markets and Crime

Abstract

AbstractThis 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.