Working Papers

Language Frictions in Consumer Credit [SSRN] [Slides]

Abstract This paper studies how language barriers between lenders and borrowers translate into differences in borrower outcomes in the U.S. mortgage market. I use survey data to infer and machine learning techniques to predict borrowers' English proficiency. I document significant descriptive differences in perceptions of mortgages, application experiences, and mortgage rates between limited English proficient (LEP) and non-LEP borrowers. To measure the causal effects of language frictions, I exploit a Federal Housing Finance Agency policy that provided translated mortgage documents in Spanish to mortgage lenders. After the policy change, LEP Hispanic borrowers had a streamlined application process, contacted more lenders, understood mortgage contracts better, and enjoyed lower borrowing costs. Reducing language frictions also led to expanded access to credit for LEP borrowers. Overall, my findings highlight a cost-effective way to create a responsible inclusion of well-qualified LEP borrowers in the mortgage market.

Redo Paperwork

The Very Long-Run Effect of Large-Scale Deworming in China [SSRN] [Slides]

with Gordon G. Liu

Abstract This paper studies the long-term impacts of an unprecedented large-scale schistosomiasis control campaign in China in the late 1950s. We present one of the first direct evidence of how an early-life deworming intervention affected life trajectories. The deworming program had a positive effect on the educational attainment of rural people. The effect was larger for people from a low socioeconomic background, suggesting that the program reduced educational inequality. Early-life exposure to the program had substantial effects on labor market success and economic status 50 years later, as well as on the second generation's schooling.

Cohort Analysis Female

Income Inequality, House Prices, and Housing Regulations [Slides] (Draft Available Soon)

with Edmund Y. Lou and Wei Xiang

Abstract This paper investigates the relationship between income inequality and house prices. We use the U.S. county-level data from 1990 to 2018 and a novel instrument for the Gini coefficient to mitigate omitted variable bias and reverse causality. Our results show that a one standard deviation increase in the Gini coefficient corresponds to a 26% increase in house prices. We propose a supply-side channel, arguing that higher income inequality leads to increased residential land use regulation, thereby reducing housing supply as people prefer low-density neighborhoods. Consistent with this mechanism, our analysis shows that a one standard deviation increase in the Gini coefficient results in a 0.35 standard deviation increase in the Wharton residential land use regulation index, leading to 10% fewer housing units, 58% fewer building permits over the next decade, and a decrease in homeownership by 2 percentage points.

Gini and Regulation

Selected Work in Progress

Quantifying the Effect of Mortgage Broker Licensing Regulations

with Tianshi Mu

Abstract We analyze the impact of mortgage broker licensing requirements on brokers, borrowers, and the market structure. By exploiting state-level variations in licensing regulations within the same Metropolitan Statistical Area (MSA), our preliminary findings show a decrease in broker employment, a larger share of college-educated brokers due to specific educational requirements, and a lower foreclosure rate for mortgages originated through brokers in more regulated counties. Interestingly, in response to licensing regulations, banks tend to open new branches, potentially easing the problem of access to credit. However, licensing regulations also result in higher interest rates for mortgages originated directly through retailers, as the decreased number of brokers diminishes upstream competition. Our future work will develop a structural model to quantify the net effect of these dynamics in equilibrium, incorporating factors such as household mortgage demand, brokers' role in connecting borrowers and lenders, and lenders' entry and pricing decisions.

Regulating Asset Resales: Evidence from Taiwan’s Housing Market

with Shi Gu and Edmund Y. Lou

Abstract We investigate the impact of resale restrictions on asset prices and sales volumes by exploiting a resale ban on presale properties in Taiwan's real estate market. Our preliminary results show that resale restrictions substantially reduce asset prices and sales volumes. The decline in sales volumes stems from the resale ban itself, as well as a decrease in initial sales when resale is not allowed. These impacts are more pronounced in regions with higher speculation levels and for properties with longer resale restriction periods. Our ongoing research explores whether developers in greater capital needs are more inclined to reduce prices to facilitate sales.

Liability Systems and Innovation: Evidence from 19th Century England

with Jinlin Wei

Abstract How do limited liability regimes affect the innovation of firms? The transition from unlimited liability to limited liability provides protection for the shareholders of firms and encourages them to increase risky investments, like innovation. We are digitizing the lists of joint-stock companies in England from historical archives between 1852 and 1860 and match patents with firms. Utilizing the changing employee size thresholds for the eligibility of adopting limited liability, we estimate how limited liability encouraged the entry of new firms and the innovative activities of firms. We expect that the impacts will be driven by firms that are characterized by large-scale production and large fixed capital investments in machines. This research aims to unravel the intricate relationship between liability structures and innovation, providing insights into how legal frameworks can shape and propel the corporate pursuit of innovation.