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The effect of payday lending restrictions on liquor sales

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  • Cuffe, Harold E
  • Gibbs, Christopher G

Abstract

We exploit a change in lending laws to estimate the causal effect of restricting access to payday loans on liquor sales. Leveraging lender- and liquor store-level data, we find that the changes reduce sales, with the largest decreases at stores located nearest to lenders. By focusing on states with state-run liquor monopolies, we account for supply side variables that are typically unobserved. Our results are the first to quantify how credit constraints affect spending on liquor, and suggest mechanisms underlying some loan usage. These results illustrate that the benefits of lending restrictions extend beyond personal finance and may be large.

Suggested Citation

  • Cuffe, Harold E & Gibbs, Christopher G, 2015. "The effect of payday lending restrictions on liquor sales," Working Paper Series 19347, Victoria University of Wellington, School of Economics and Finance.
    • Handle: RePEc:vuw:vuwecf:19347
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    File URL: https://ir.wgtn.ac.nz/handle/123456789/19347
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    Cited by:

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    More about this item

    Keywords

    Payday lending; Consumer credit; Alcohol;
    All these keywords.

    JEL classification:

    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law

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