Research

Abstract. Students from low-income families invest much less in college education than high-income families. To assess the role of finance and subsidy schemes, I estimate a model of college choice with financing frictions. I find that the college education gap is mainly due to heterogeneity in preparedness for college; frictionless access to student loans would substantially increase consumption during college but would only marginally affect the investment gap in college education. I show that making public colleges tuition-free would mitigate financing constraints, but overall it would entail $11 billion deadweight loss per year and would disproportionately benefit wealthier students.

Abstract. We document that finance-dependent industries benefit from financial development, but if and only if trade barriers are low. To explain this finding, we develop an international trade model featuring cross-country financial friction heterogeneity. Although product markets are competitive, production in finance-dependent sectors is supported by endogenous profit margins to prevent firms from making strategic defaults. We test this mechanism using cross-country firm-level ORBIS data. We further show that, because of profit shifting, a country may gain more (relative to the frictionless case) when trading with less financially developed economies, and a small open economy may not benefit from financial development.

Abstract. The rapid rise in student loan balances has raised concerns among economists and policymakers. Using administrative credit bureau data, we find that nearly half of the increase in balances from 2000 to 2020 is due to deferred payments, largely driven by the expansion of income-driven repayment (IDR) plans, which link payments to income. These plans help borrowers by smoothing consumption, insuring against labor income risk, and reducing the present value of future payments.  We build a life-cycle model to quantify the welfare gains from this payment deferment and the channels through which borrower welfare increases. New, more generous IDR rules increase this transfers from taxpayers to borrowers without yielding net welfare gains. By lowering the average marginal cost of undergraduate debt to less than 50 cents per dollar, these rules may also incentivize excessive borrowing. We demonstrate that an optimally calibrated IDR plan can achieve similar welfare gains for borrowers at a much lower cost to taxpayers, and without encouraging additional borrowing, primarily through maturity extension.

Abstract.  We estimate a search-and-matching model with bargaining, using real-stakes experiments with U.S. venture capitalists (VCs) and startups, alongside real-world portfolio data, to examine how bargaining affects the distribution of payoffs and welfare in the startup-VC matching environment. We identify startup and VC characteristics that influence bargaining and find that 60 (55) percent of the impact of appealing characteristics on startups' (VCs') benefits from matching arises from improved bargaining power. Counterfactual analyses further reveal a nontrivial impact of search frictions on bargaining and welfare. Overall, our results highlight the first-order importance of bargaining in shaping matching outcomes in entrepreneurial financing ecosystems.

Abstract. This paper introduces a computationally efficient methodology for estimating variants of structural models. Our approach approximates the relationship between moments and parameters, offering a low-cost alternative to traditional estimation methods. We establish general convergence conditions, primarily requiring model-based moments to be continuous functions of parameters. While this continuity does not necessitate a continuous economic model, it does require the model to have only sparse discontinuities, a concept we define. We also provide convergence rate bounds for Kernel and Neural Net approximations, with the latter demonstrating superior performance in higher dimensions.
We apply this methodology to two standard structural models: (1) dynamic corporate finance and (2) life-cycle portfolio choice. We demonstrate the reliability of our approach through simulations and then use it to explore identification, robustness to sample splits and moment selection, and model misspecification. These explorations are computationally infeasible with standard techniques, but become trivial with our methodology.

Abstract. We show that bank credit affects entrepreneurship, but only in low-income regions. We use a novel methodology to identify credit supply shock from regional demand shock using comprehensive data on small business loans between pairs of banks and counties in the US. While there is no impact in top income quartile counties, we document that a one std credit supply shock is associated with 1.6 and 1.7 percentage point employment and payroll growth in newborn firms in bottom income quartile counties. We show that this impact is long-lasting; is pronounced only in newborn firms; is not just a redistribution of labor from established to newborn firms; and does not follow with a reduction in labor productivity. We estimate that a credit redistribution of $100 from counties of above- to below-median income per capita results in $6.5 annual labor earnings in the aggregate.

Abstract. What is the social impact of the financial intermediation sector? I analyze the aggregate and the redistribution impact of financial intermediaries in an economy with a set of potential entrepreneurs. The intermediation sector endogenously develops to relax credit constraints by monitoring a borrowing entrepreneur. Competitive intermediaries i) eradicate non-fundamental-based income inequality by spreading economic opportunity to financially constrained individuals—the redistribution impact, and ii) boost entrepreneurship and restore the socially optimal occupational pattern—the job-creation impact. Although the job-creation impact is socially beneficial, the redistribution impact is not—social surplus declines overall due to a pecuniary externality associated with the redistribution function of the financial intermediation sector. Monopoly intermediation limits the redistribution impact and may raise the utilitarian welfare.