Minority Depository Institutions (MDIs) specialize in operating in low-income communities and face a trade-off between their mission to expand banking services to the poor and their viability. I propose business focus measures that capture the geography and socioeconomic status of MDIs' targeted market segment and construct management quality variable to analyze the trade-off. I estimate the effects of business focus and management quality measures on a bank's likelihood of exit through failure or acquisition using the Cox proportional-hazard model with competing risks and bank-level data for 2001-2019. The results suggest that MDIs with a greater focus on market segments with a higher share of low-income communities or higher housing vacancy rates and well-managed MDIs are less likely to fail. The results are consistent with theory and provide empirical evidence for conjectures that banks particularly vulnerable to economic downturns are better off concentrating their operations in regions of their expertise, given the scale and scope of effort required to manage risk. I also find that MDIs focusing on markets with higher housing vacancy rates are less likely to be acquired, indicating that banks specializing in market segments susceptible to economic declines are not attractive acquisition targets.
I investigate bank branching decisions with endogenous location choices and their role in serving low-income communities by focusing on Minority Depository Institutions (MDIs). I approach the question using a game-theoretic, industrial organization model in which location-choice decisions are formalized through a static two-stage entry-location game. MDI location choices depend endogenously on their rivals' location choices and the location-specific demand. I show that locations with favorable demand characteristics positively affect payoffs while the presence of rivalrous MDIs negatively affects payoffs from that location. The results also indicate that an increase in distance between an MDI and its rivals softens competition. Therefore, since high-demand locations are likely attractive to many MDIs, some MDIs may choose to locate in low-demand locations to avoid harsher competition. Overall, the findings support the conjecture that bank branching decision is a trade-off between favorable location-specific demand characteristics and competition.
The rapid growth of U.S. student loan debt has drawn attention from scholars and raised public concerns with presidential candidates proposing ``Student Loan Forgiveness'' plans as part of their campaigns. I explore the political economy of such proposals by developing a two-period model of schooling and unemployment insurance with search costs. Schooling benefits individuals directly, through increased future earnings and lower search costs in the labor market, and indirectly, through increased aggregate taxable income in the economy which results in an enhanced unemployment insurance. The model suggests that schooled median voter will favor student loan forgiveness policy. This attitude intensifies as the average probability of employment in the economy falls. However, median voter's support for the policy, and for redistribution in general, attenuates as his probability of employment increases. By contrast, unschooled median voter will not be in favor of the policy, since publicly funding higher education decreases the share of redistribution to unemployment insurance.
“Smartphone Diffusion and Consumer Price Comparison Shopping Behavior: Implications for the Marketplace Fairness Act.” Economics Bulletin, vol. 36(3), 2016, pp. 1337–1353 with Ishuan Li, Robert Simonson, and Matthew Tuomala.
“Restructuring the New Markets Tax Credit Program: Three Proposed Changes for Increasing Efficiency.” Community Dividend, Federal Reserve Bank of Minneapolis, April 2012, 2012. https://www.minneapolisfed.org/article/2012/exploring-innovations-essay-contest-winner-restructuring-the-new-markets-tax-credit-program-three-proposed-changes-for-increasing-efficiency.