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Evading the 'Taint of Usury': The usury prohibition as a barrier to entry

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  • Koyama, Mark

Abstract

The development of capital markets in medieval Europe was shaped for centuries by the religious ban on lending money at interest. This paper examines how this prohibition developed as the outcome of strategic behavior by religious, commercial and political elites. A model is developed to analyze this hypothesis and to examine how the usury prohibition developed over time. It suggests that an important reason for the persistence of the ban was that it created a barrier to entry that enabled secular rulers, the Church, and a small number of merchant-bankers to earn monopoly rents.

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Bibliographic Info

Article provided by Elsevier in its journal Explorations in Economic History.

Volume (Year): 47 (2010)
Issue (Month): 4 (October)
Pages: 420-442

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Handle: RePEc:eee:exehis:v:47:y:2010:i:4:p:420-442

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Web page: http://www.elsevier.com/locate/inca/622830

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Keywords: Usury Transaction costs Church Regulatory capture;

References

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Cited by:
  1. Murizah Osman Salleh & Aziz Jaafar & M. Shahid Ebrahim, 2011. "The Inhibition of Usury (Riba An-Nasi'ah) and the Economic Underdevelopment of the Muslim World," Working Papers 11002, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).
  2. Anderson, R. Warren & Johnson, Noel D & Koyama, Mark, 2013. "From the Persecuting to the Protective State? Jewish Expulsions and Weather Shocks from 1100 to 1800," MPRA Paper 44228, University Library of Munich, Germany.

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