In this work we shed light on some issues concerning the impact of the efficiency of both bankruptcy proceedings and criminal justice on usury. In the model we show that, while increasing punishment for illegal lenders reduces usury, improving efficiency of bankruptcy proceedings may have perverse effects. We find that if bankruptcy proceedings are very inefficient, usury cannot occur even in presence of very high informal interest rates due to the complete failure of the banking sector; if bankruptcy proceedings are highly efficient further improvements decrease usury while more severe sanctions are ineffective; if bankruptcy proceedings are mildly inefficient, more efficiency is likely to increase the probability that lending takes place through usurious contracts, while strengthening punishments has deterrence effects. This provides policy implications in terms of polarizing the allocation of public resources in case of reforms in the criminal/judicial sector. Finally, simulations of the theoretical model using a lognormal distribution for collateral suggest that changing average collateral and its inequality have opposite effects on the likelihood of usury but do not change the basic predictions of the model, providing evidence that less-developed countries are those requiring substantial interventions in order to curb the phenomenon of illegal credit.
|Citazione:||Crosato, L., & Dalla Pellegrina, L. (2008). Improving Bankruptcy Proceedings or Strengthening Punishments? An Assessment on Anti-Usury Policies [Working paper].|
|Titolo:||Improving Bankruptcy Proceedings or Strengthening Punishments? An Assessment on Anti-Usury Policies|
|Autori:||Crosato, L; Dalla Pellegrina, L|
|Carattere della pubblicazione:||Scientifica|
|Data di pubblicazione:||2008|
|Appare nelle tipologie:||99 - Altro|