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The role of pawnshops in risk coping in early twentieth-century Japan

Published online by Cambridge University Press:  14 July 2021

Tatsuki Inoue
Tatsuki Inoue*
Affiliation:
Tokyo University of Science
*
Tatsuki Inoue, Department of Business Economics, School of Management, Tokyo University of Science, 1-11-2, Fujimi, Chiyoda-ku, Tokyo, 102-0071, Japan; email: [email protected].
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Abstract

This study examines the role of pawnshops as a risk-coping device in Japan in the early twentieth century, when the poor were very vulnerable to unexpected shocks such as illness. In contrast to European countries, Japanese pawnshops were the primary financial institution for low-income people up to the 1920s. Using data on pawnshop loans for more than 250 municipalities and exploiting the 1918–20 influenza pandemic as a natural experiment, we find that the adverse health shock increased the total amount of loans from pawnshops. This is because those who regularly relied on pawnshops borrowed more money from them than usual, and not because the number of people who used pawnshops increased. Our estimation results indicate that pawnshop loan amounts increased by approximately 7–10 percent due to the pandemic. These findings suggest that pawnshop loans were widely used as a risk-coping strategy.

Keywords

pawnshoprisk-coping strategyinfluenza pandemicprewar Japan

JEL classification

N25: Asia including Middle East G23: Non-bank Financial Institutions • Financial Instruments • Institutional Investors I13: Health Insurance, Public and Private
Type
Articles
Information
Financial History Review , Volume 28 , Issue 3 , December 2021 , pp. 319 - 343
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Copyright
Copyright © The Author(s), 2021. Published by Cambridge University Press on behalf of the European Association for Banking and Financial History

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Footnotes

I would like to express my gratitude to Tetsuji Okazaki, Kota Ogasawara and participants at the Economic History Society Annual Conference 2019 at Queen's University Belfast and 2019 Japanese Economic Association Spring Meeting at Musashi University for their helpful comments. I am also grateful to the editor and two anonymous referees for their insightful comments and suggestions. This work was supported by Grant-in-Aid for JSPS Fellows (grant no. 17J03825) and Grant-in-Aid for Research Activity Start-up (grant no. 20K22101). Any errors are my own.

References

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