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

TL;DR

This paper investigates how pawnshops functioned as a risk-coping mechanism during early 20th-century Japan, especially during the 1918-1920 influenza pandemic, revealing increased borrowing among regular users during health shocks.

Contribution

It provides empirical evidence on pawnshops' role in risk management in prewar Japan using historical data and natural experiment analysis.

Findings

Adverse health shocks increased pawnshop loan amounts

Regular users borrowed more during health crises

Number of pawnshop users did not significantly change

Abstract

This study examines the role of pawnshops as a risk-coping device in prewar Japan. Using data on pawnshop loans for more than 250 municipalities and exploiting the 1918-1920 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 to cope with the adverse health shock, and not because the number of people who used pawnshops increased.