Banking Across America: Distance and Branch Use (with Alexander K. Zentefis)

Paper, Online Appendix

We use anonymous location data from millions of mobile devices to infer three features of income and racial patterns in bank branch access and use throughout the United States. First, residents from poorer block groups are 7.2 percentage points less likely to visit a branch in a year than residents from richer block groups. Likewise, residents from block groups with higher Black population shares are 6.2 percentage points less likely to visit a branch relative to residents from block groups with higher White population shares. Survey evidence suggests that these lower visitation rates are not recouped by greater use of mobile or online banking. The drop-off in visitation by income steepens in large Metropolitan core areas. These urban cores also observe the highest segregation of branch goers by race and income. The urbanized Northeast is more segregated than the rural South. Second, residents from block groups with larger Black population shares on average live farther from their nearest branch and travel farther when visiting them. A gravity equation model demonstrates that Black residents living farther from bank branches explains roughly 25-33% of the Black-White gap in branch use across the country and 72-86% of the gap within Metro cores. Black residents’ far greater remoteness from banks in big cities explains why distance plays such a major role in affecting their branch use there. Third, a policy of postal banking that adds banking services to Post Office branches would relieve some distance costs, and we estimate it would decrease the mean distance to banks in Metro cores by 11.5%. But the policy would close only 6% of the Black-White gap in bank branch use within these areas. The modest effect is due in part to residents of Metro cores living relatively farther away from Post Office branches than they do from private banks, thus making it difficult for postal banking to overcome the distance barriers.

Effect of Ownership Composition on Property Prices and Rents: Evidence from Chinese Investment Boom in US Housing Markets

SSRN, Paper, Online Appendix

A capital influx into local housing markets would be expected to increase house prices, but the spillover effect onto rental prices is theoretically ambiguous. I estimate both price impacts in U.S. residential housing markets using data from a boom in real estate purchases by buyers from China, which amounted to $200 billion of purchases made between 2010 and 2019. Using a novel method to measure these purchases and an instrumental variable for where purchases are made, I find a large positive house price impact. Consistent with investment q-theory, rents fall as constructions rise, especially in areas with elastic housing supply.

Identifying Taste-based Discrimination: Impact of Black Electoral Victories on Racial Prejudice and Economic Gaps

SSRN, Paper, Online Appendix

The election and presidency of Barack Obama intensified discussions of how electing a Black leader affects White Americans' attitude toward Black Americans. I test for the causal impact of Black electoral victories on racial prejudice in local elections. Using Race Implicit Attitude Test scores as a measure of racial prejudice and close-election regression-discontinuity design for causal inference, I find Black electoral victories cause measures of racial bias to rise, by 4% of the average Black-White difference in IAT scores. Simultaneously, they cause larger racial gaps in unemployment and mortgage denials. Interpreting these close electoral victories as instrumental variables, I find a large causal effect of prejudice-based racial discrimination on Black-White economic gaps.

Intergenerational Elasticity of Consumption and Income (with Lancelot Henry de Frahan)


We estimate the intergenerational elasticity (IGE) of consumption. As a complementary analysis to income IGE, consumption mobility is a closer measure of welfare mobility, and comparisons with income IGE are informative about intergenerational consumption insurance (in a frictionless, dynastic benchmark, the consumption IGE is one). Using surnames as links, we merge income and home values from the 1940 full-count Census to today's home value as a proxy for consumption. We estimate a 70-year surname-level elasticity of 0.42. We construct an econometric methodology to infer family-level IGE of consumption from the surname-level data. Adjusting for surname vs. family and converting primary house value to overall consumption via the Engel curve, we estimate a 70-year family-level consumption IGE of 0.36. We document heterogeneity in the consumption IGE: blacks have much lower IGE than whites, the Northeast has higher IGE than the South and Midwest, and in particular, the black-white gap in IGE is concentrated in the Northeast. We discuss possible mechanisms behind the level and heterogeneity in the estimated IGE of consumption.

Cyclical Transactions and Wealth Inequality


Wealth is distributed more unevenly than income, and one contributing factor might be that richer households earn higher portfolio returns. I uncover one channel that causes portfolio returns to be increasing in wealth: Poorer households consistently buy risky assets in booms—when expected returns are low—and sell after a bust—when expected returns are high. Although time-varying expected returns are a robust empirical fact, theories are ambiguous on whether poorer or richer households engage in such cyclical trading patterns. I estimate the trading patterns for households across wealth levels, in the US housing market for 1988-2013. I interact housing ownership patterns from deeds records with household-level wealth, which I infer from merging owners' surnames with their name-based income in the 1940 full Census. The estimated dispersion in expected returns from this “buy-high-sell-low” channel is large: The interquartile-range difference is 60 basis points per year. The channel predicts that geographies with historically higher volatility will feature more wealth inequality than income inequality: I verify this implication in the data. These results suggest that a government policy intended to boost poorer households' wealth via homeownership can backfire if it ignores the status of house prices.


Market Power as Skin-in-the-Game (with Paymon Khorrami)

We show that, when households have mistaken beliefs or less information, intermediary market power can limit over-investment, improve resource allocation, and reduce asset price volatility. If intermediaries are compensated based on their returns, market power increases their compensation, leading to better incentives to invest according to the social good. The results are analogous if intermediaries are compensated based on assets under management in a dynamic world: market power creates skin-in-the-game incentives, even if they are absent in the contract. We devise a series of empirical tests, in both finance and non-finance arenas, as to the interacting effects of household irrationality and intermediary competition.

Impact of Economic Condition on Racial Prejudice

Does deteriorating economic condition cause racial prejudice to rise? Despite psychological/sociological microfoundations and multiple economic implications of the inferiority of racial prejudice, empirical evidence has been inconclusive. This paper constructs better-powered measures of local areas' racial prejudice using Google searches for racial slur and "KKK," white-on-black non-pecuniary crime, survey responses and corporal punishment at school. Across these measures, racial prejudice correlates negatively with the local economic condition. Using predictors of local economic condition in the 2000s, I show that the relationship is causal: lower income causes higher racial prejudice in the area.


Which Early Withdrawal Penalty Attracts the Most Deposits to a Commitment Savings Account? (with John Beshears, James Choi, Christopher Harris, David Laibson and Brigitte Madrian) Journal of Public Economics, 2020, 183

Paper, Online Appendix, Link to published version

Media: The Atlantic, WSJ