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

  • Koyama, Mark

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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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
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622830

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