Abstract
Using data for Mississippi, this paper revisits Burkey and Simkins’ (2004) work on factors determining the number of payday lenders and banks. With data at two levels of geographic aggregation, the paper discovers whether empirical results are robust and allows for uncertainty in geographic definition of markets. Demand factors of population, income, and wealth have important impacts. Percentage of population with college education depresses numbers of payday lenders. Evidence indicates that banks are less likely to locate in African American areas, but the results show that race is neither a positive nor a statistically significant determinant of location for payday lenders.
Highlights
Low-income households in the United States confront significant day-to-day difficulties in meeting needs and must often resort to borrowing
In a national climate of concern about credit markets and in the historical context of a dramatic growth in fringe financial institutions in the United States, this paper provides further analysis of the determinants of the location of payday lenders that both validates previous findings in the area and seems to challenge other findings
Of some note is that the Burkey and Simkins paper shows that median household income is negatively related to the number of payday lenders, a result which is found here
Summary
Low-income households in the United States confront significant day-to-day difficulties in meeting needs and must often resort to borrowing. These data were matched to ZCTA and county level data to study the statistical determinants of store location in Mississippi at both an aggregated county level and at the much more disaggregated ZCTA level The results of this analysis are compared with similar research performed relative to banking and payday lenders in North Carolina (Burkey and Simkins, 2004). The paper revisits the question as to whether payday lenders primarily service markets based on race, income, and education It reviews the different determinants of bank locations relative to payday lenders as well as any potential geographical relationship between the two. This paper provides further evidence on the factors affecting location in the ―fringe‖ banking industry, and it differs from earlier research in highlighting the importance of traditional demand side factors as well as critically considering the possibility of important geographic factors in determining location
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