(Don't) Take Me Home: Home Bias and the Effect of Self-Driving Trucks on Interstate Trade (Job Market Paper) [Link, Download PDF]
Abstract: How will self-driving trucks transform U.S. interstate trade? I argue that human drivers' preferences to return home generate geographic specialization in the freight market, and self-driving trucks would eliminate this "home bias." I build a model of trucking carriers who make dynamic decisions about where to work, given that they prefer to be at home. A large home bias increases the value of driving places that are likely to bring one home and increases the value of taking time off at home. Using trucking freight transactions and highway inspections, I estimate the model parameters and find that carriers value being at home at $70 per day or about 1/3 of the daily wage. In a counterfactual where self-driving trucks have no home bias, carriers shift from driver-rich states to driver-poor states, and total driving increases as carriers spend less time off. The increased supply of carriers lowers overall freight prices by 5 percent and especially benefits driver-poor states. In a full counterfactual which also captures the effect of self-driving trucks on per-mile costs and daily driving range, eliminating home bias explains about 20 percent of the fall in overall prices.
Awards: Urban Economics Association 2021 Student Prize (Honourable Mention)
From Market Making to Matchmaking: Does Bank Regulation Harm Market Liquidity? (with Gideon Saar, Jian Sun, and Haoxiang Zhu) [SSRN] [R&R, Review of Financial Studies]
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.