Geographic Specialization and Trucking Freight (Job Market Paper) [draft coming soon]
Abstract: I study geographic specialization in the U.S. market for trucking freight shipments. Drivers (carriers) specialize in regional geographic markets, causing regions with high truckers-per-capita to experience cheaper freight costs. I develop a model which captures the dynamic incentives of trucking carriers as they make repeated decisions about where next to deliver freight. A simple preference to be at home has rich effects on carrier value functions, as the value of locations likely to offer return jobs increases. I estimate this model using data on trucking freight prices from the spot market and US highway inspections. In a counterfactual world with autonomous trucking where trucks has no preference for a home location, I find that trucks would distribute across the economy, capital utilization would increase, and currently undesirable states with few truckers would benefit.
From Market Making to Matchmaking: Does Bank Regulation Harm Market Liquidity? (with Gideon Saar, Jian Sun, and Haoxiang Zhu) [SSRN]
Abstract: Post-crisis bank regulations raised market-making costs for bank-affiliated dealers. We show that this can, somewhat surprisingly, improve overall investor welfare and reduce average transaction costs despite the increased cost of immediacy. Bank dealers in OTC markets optimize between two parallel trading mechanisms: market making and matchmaking. Bank regulations that increase market-making costs change the market structure by intensifying competitive pressure from non-bank dealers and incentivizing bank dealers to shift their business toward matchmaking. Thus, post-crisis bank regulations have the (unintended) benefit of replacing costly bank balance sheets with a more efficient form of financial intermediation.