Research

REAL ESTATE AND URBAN ECONOMICS

The Babies of Mortgage Market Deregulation

Review of Financial Studies, 2020

This paper documents that mortgage market deregulation helps mitigate the risk of population aging by affecting a foundational family-level decision: the choice to have children. Using a U.S. federal regulator ruling, I show that young households fully exposed to mortgage market deregulation increase their probability of purchasing a home and having a child by 6 percentage points. Supplemental tests reject alternative hypotheses based on income or housing wealth growth and, instead, suggest that access to space is the relevant economic mechanism. Collectively, the evidence indicates that increased access to mortgage credit affects the total number of children in the economy.

Internet Appendix
Link to RFS
Link to SSRN

Interest Rates and the Distribution of House Prices

Review of Economic Studies, Revise and Resubmit (2nd)

Do homeowners experience equal gains in housing wealth following shocks in interest rates? Exploiting incidental differences in the distribution of the metropolitan population to estimate demand for small neighborhoods, this paper shows that a decline of 1.2 percentage points in mortgage rates leads to a concurrent increase of 5% to 7% in home values in middle-priced neighborhoods. High- and low-priced neighborhoods experience no changes. I introduce a housing assignment model with credit constraints that rationalizes these findings. The results have two implications for the interest rate shock between July-2000 and December-2001. First, this shock led to an estimated contemporaneous aggregate increase of $160B to $240B in housing wealth for homeowners of middle-priced homes; and second, it may have caused an increase of 21% to 26% in house prices in middle-priced neighborhoods during the subsequent housing boom.

Link to SSRN

Priced-Out: Rent Control and Wage Inequality (with Geraldo Cerqueiro and Pedro Raposo)

Sep 2023, public version available soon

Proponents of rent control policies claim that they offer affordable housing near job-rich areas. Using a quasi-natural experiment in Portugal, we show that earnings of low-income workers decline by 5 percent after losing access to rent control. High-income workers experience no loss, despite both groups being pushed to the outskirts of large cities. The wage decline stems from transition to jobs with poor matching quality. Our evidence suggests that low-income workers cannot afford commuting costs to higher-paying jobs. While rent control benefits low-income workers, we show that their wage losses only constitute 5-10% of landlords' open-market gains.

FINANCIAL AND LABOR ECONOMICS

Information Dispersion Across Employees and Stock Returns (with Ashwini Agrawal and Zhongchen Hu)

Review of Financial Studies, 2020

-> Review of Financial Studies Best Paper Award in Behavioral Finance

Rank-and-file employees are becoming increasingly critical for many firms, yet we know little about how their employment dynamics matter for stock prices. We analyze new data from the individual CV’s of public company employees and find that rank-and-file labor flows can be used to predict abnormal stock returns. Accounting data and survey evidence indicate that workers’ labor market decisions reflect information about future corporate earnings. Investors, however, do not appear to fully incorporate this information into their earnings expectations. The findings support the hypothesis that rank-and-file employees’ entry and exit decisions reveal valuable insights into their employers’ future stock performance.

Link to RFS
Link to SSRN

Forced Entrepreneurs (with Kristoph Kleiner)

Journal of Finance, 2022

-> Journal of Finance Brattle Group Prize Distinguished Paper awarded

Conventional wisdom suggests labor market declines drive workers towards temporary entrepreneurship and self-employment, lowering the quality of startups. Analyzing the employment histories of 640,000 workers, we document graduating college during a period of high unemployment does increase entry to entrepreneurship. However, based on multiple measures of success, including survival, growth, innovation, and venture capital funding, recession-driven entrepreneurs are equal to or more capable than voluntary entrepreneurs. Explaining these results, we find labor shocks disproportionately impact workers with the greatest wage potential and these same workers start highly-successful firms. Overall, we confirm the prevalence of untapped entrepreneurial potential in the workforce, especially across the top of the income distribution.

Link to JF
Link to SSRN

Competing for Talent: Firms, Managers, and Social Networks (with Kristoph Kleiner)

Review of Financial Studies, 2022

Do social networks help firms recruiting talented managers? In our setting, firms are randomly connected to prospective young managers through former employees. Under a discrete-choice model, we find networks increase the likelihood firms hire high-ability managers, while having no effect on the hiring rate of low-ability managers. Effects are greatest for nonlocal firms, strong ties, and peers living in the same neighborhood. Survey evidence suggests social networks promote recruitment by providing information about firm fundamentals to potential applicants. Our results help rationalize why the majority of managers hold prior connections to the firm.

Link to RFS
Link to SSRN

Confidence Spillovers: Evidence from Entrepreneurship (with Kristoph Kleiner)

Review of Finance, Conditionally accepted

Evaluating the market for potential entrepreneurs, we test whether interacting with confident agents encourages entry into competitive environments. Under an experimental setting, we find that young managers confident in their entrepreneurial potential, despite no prior experience, increase the likelihood their peers become entrepreneurs or join startups. As our results are driven by less confident individuals, primarily women, starting businesses, these firms perform no worse than other new firms. Through multiple surveys, we verify treated managers report increased entrepreneurial confidence, and reject alternative explanations including increased entrepreneurial knowledge and risk tolerance. Our results support a theory of entrepreneurship where individuals evaluate their potential relative to nearby peers rather than the population.

Link to SSRN

Racial Prejudice in the Workplace and Firm Boycotts

Journal of Political Economy, Reject and resubmit

I investigate the impact of contemporary grassroots boycotts on addressing racial discriminatory practices within a firm. Introducing new data on allegations of racial prejudice in the workplace, I show that when these allegations are more (randomly) prominent to prospective employees and consumers, foot traffic declines by 4-5% at stores located in predominantly non-white, young, and low-income zip codes. Additional results show that information spreads quickly between internet platforms, shedding light into the mechanisms of a grassroots boycott. A randomized survey experiment confirms that prospective employees and consumers boycott a firm after learning about incidents of workplace racial prejudice.

Link to SSRN

Finance Wage Premium and Entrepreneurship (with Nandini Gupta)

May 2022

Does high pay cause a “brain-drain” to finance shrinking the pool of potential entrepreneurs? Or do talented bankers ease financial access for skilled entrepreneurs? Comparing engineers from the same school-engineering-major graduating one-year apart, those exogenously exposed to high finance wages at graduation are more likely to take finance jobs and less likely to subsequently become entrepreneurs. But high finance wages also increase entrepreneurship in that graduating class. Consistent with peer effects, engineers are more likely to become successful entrepreneurs if more of their classmates are venture capitalists. Contrary to conventional wisdom, we find that the finance wage-premium increases transformational entrepreneurship.

Link to SSRN