Working Papers

Network Structure and Efficiency Gain from Mergers: Evidence from the U.S. Freight Railroads [Feb. 2021]

Abstract: This paper studies the role of network structure in spatial competition. Markets are interdependent in a network, hence, the network structure (topology of network) affects how much firms benefit from economy of scope. This paper studies the role of networks in affecting the effect of mergers by examining mergers that took place from 1985 to 2010 in the U.S. freight railroad industry. I estimate an optimal transport network model that features firms’ pricing, routing, and allocation decisions in multiple origin-destination markets. My model allows origin-destination markets to be interdependent in the cost minimization stage, and the model has rich implications in understanding the change of shipment prices after mergers. On average, shipment price decreased by 9% following a merger, and the price decreased by 11% where railcars no longer had to be switched between two companies as a result of a merger. Results also suggest that if the betweenness centrality of a station is larger, the reduction of cost is larger after the merger. Throughout the period studied, the average degree centrality increased and the average betweenness centrality decreased, at the firm level. This indicates that mergers of railroad firms have generated a lower reduction of cost and a higher increase of mark-up in recent years.

A Structural Empirical Model of R&D, Firm Heterogeneity, and Industry Evolution, joint with Daniel Yi Xu [Dec. 2020] (new draft coming soon)

Abstract: This paper develops and estimates a dynamic industry equilibrium model of R&D, R&D spill-overs, and productivity evolution of manufacturing plants in the Korean electric motor industry from 1991 to 1996. Plant-level decisions for R&D, physical capital investment, entry, and exit are integrated in an equilibrium model with imperfectly competitive product market. We use a Simulated Method of Moments estimator to estimate the cost of R&D, the magnitude of the R&D spill-over, adjustment costs of physical investment, and the distribution of plant scrap values. The recent approximation method of Weintraub, Benkard and Van Roy (2007) is applied. Counterfactual experiments of two policies are implemented. Increasing the elasticity of substitution between products increases plant innovation incentives and the plant turnover. In contrast, a lower entry cost does not change industry productivity. Although the market selection effect is strengthened by higher firm turnover, the plant’s incentives to invest in R&D are reduced.

Collateral Damage: The Impact of Shale Gas on Mortgage Lending, joint with James Roberts, Christopher Timmins, and Ashley Vissing [2020, submitted]

Abstract: We analyze mortgage lenders’ behavior with respect to shale gas risk during the period of the U.S. shale gas boom, which coincided with the U.S. housing market rise, collapse and subsequent increase in lending industry scrutiny. Shale gas operations may place affected houses into technical default such that GSE’s (Fannie Mae and Freddie Mac) are unable to maintain them in their portfolios. We find that lenders did indeed increase the weight they place on shale risk relative to income risk in mortgage pricing behavior after 2010. This effect is particularly evident for groundwater dependent properties, indicating that lenders view shale activities as placing the residential value of these properties at greater risk.


Mortality Decline, Retirement Age, and Aggregate Savings (with Sau-Him Paul Lau), Apr 2016, Macroeconomic Dynamics 20, no. 3: 715-736.

Optimizing the Scale of Markets for Water Quality Trading (with Martin W. Doyle, Lauren A. Patterson, Kurt E. Schnier, and Andrew J. Yates), Sep 2014, Water Resources Research 50.9: 7231-7244

Economic Incentives to Target Species and Fish Size: Prices and Fine-Scale Product Attributes in Norwegian Fisheries (with Frank Asche and Martin D. Smith), Dec 2014, ICES Journal of Marine Science 72, no. 3: 733-740.