A joint event between CSEAR and Master of Food and Resource Economics (MFR E).
Using a unique dataset\, we study the unlicensed money lending ma rket in Singapore. In this market\, borrowers search for loan sharks to bor row from and loan sharks decide how much money to extort from the borrowers . In equilibrium\, we observe dispersion over the degree of extortion by di fferent lenders. A sizable number of borrowers are the recurring customers of some loan sharks. Lastly\, as search friction increases due to heightene d enforcement efforts to arrest unlicensed moneylenders\, it becomes increa singly difficult for borrowers to find loan sharks in the market. Loan shar ks who previously extorted heavily from borrowers and thus had difficulty r etaining customers are now finding it easier to do so. Finally\, we find th at increasing enforcement efforts by the authorities\, on average\, have th e following effects: The initial interest rate attached to the loan agreed upon by both the lender and the borrowers increases\, the loan amount that the lender is willing to give out to the borrower decreases\, the amount of money the lender extorts from the borrower increases and harassment activi ties by the lenders directed against the borrower fell in terms of both sev erity and frequency.
Speakers: Kaiwen Leong (Nanyang Technological University\, Singapore) and Haibo Xu (Fudan University\, Shanghai)
Kaiwen Leong is an As sistant Professor at the Nanyang Technological University. He received his PhD degree in Economics from Princeton University. Before joining academia\ , he spent several years working as a volunteer helping ex-offenders rebuil d their lives. His research interests lie in the underground economy\, labo r economics and microeconomics. He has published papers in the Economic Jou rnal\, the journal of institutional and theoretical economics and Economic Letters.
Haibo Xu is an Assistant Professor at the S chool of Economics\, Fudan University. He received his PhD degree in Econom ics from Washington University in St. Louis. His research focuses on Game T heory\, Contract Theory and Corporate Finance\, and he is now particularly interested in the economic and social aspects of how participants of underg round economy make decisions and interact with others.