The Decline of Bank Branching
National Bureau of Economic Research Working Paper2025
We study U.S. bank branch openings and closings from 2001 to 2023. Both are more common in areas with low deposit franchise value, a consequence of greater interest-rate sensitivity among financially sophisticated households with higher digital banking adoption. The effects are strongest for large banks. Lending plays a minimal role. Incumbents retain branches where depositors are less sensitive to rates because they can extract deposit spreads; entrants avoid such markets because sticky customers are difficult to attract. The pandemic accelerated closures by increasing digital reliance. Our findings highlight deposit franchise value as the primary driver of modern branch restructuring.
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The paradox of slave collateral
Explorations in Economic History2025
As mobile financial assets, slaves have high liquidation value that makes them desirable as loan collateral. The mobility of slaves also makes them insecure collateral because borrowers could sell slaves to outside buyers or move them beyond the reach of creditors. We contend that creditors balanced the opposing forces of liquidity and security in deciding whether to extend credit against slave collateral. Using an original sample of New Orleans mortgage and sales records, we find that relatively few loans were backed with slave collateral and that slave buyers paid higher interest rates for their loans.
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Will Neural Scaling Laws Activate Jevons' Paradox in AI Labor Markets? A Time-Varying Elasticity of Substitution (VES) Analysis
arXiv preprint2025
We develop a formal economic framework to analyze whether neural scaling laws in artificial intelligence will activate Jevons' Paradox in labor markets, potentially leading to increased AI adoption and human labor substitution. By using a time-varying elasticity of substitution (VES) approach, we establish analytical conditions under which AI systems transition from complementing to substituting for human labor. Our model formalizes four interconnected mechanisms: (1) exponential growth in computational capacity (C(t) = C(0) \cdot e^{g \cdot t}); (2) logarithmic scaling of AI capabilities with computation (\sigma(t) = \delta \cdot \ln(C(t)/C(0))); (3) declining AI prices (p_A(t) = p_A(0) \cdot e^{-d \cdot t}); and (4) a resulting compound effect parameter (\phi = \delta \cdot g) that governs market transformation dynamics.
Can the Nexus of Scaling Laws Coupled with Constant or Variable Elasticity of Substitution Predict AI and Other Technology Adoption?
arXiv preprint2025
Emergent technologies such as solar power, electric vehicles, and artificial intelligence (AI) often exhibit exponential or power function price declines and various ``S-curves'' of adoption. We show that under CES and VES utility, such price and adoption curves are functionally linked. When price declines follow Moore's, Wright's and AI scaling "Laws,'' the S-curve of adoption is Logistic or Log-Logistic whose slope depends on the interaction between an experience parameter and the elasticity of substitution between the incumbent and emergent good. These functional relations can serve as a building block for more complex models and guide empirical specifications of technology adoption.
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Depositor Characteristics and Deposit Stability
SSRN2024
Using cellphone geolocation data to identify the characteristics of bank depositors, we document considerable heterogeneity in terms of the age, income, education, and financial sophistication of depositors across banks and branches. We show that depositor characteristics influence a bank's rate-setting behavior and its deposit flows. Despite increasing deposit rates, banks with financially sophisticated depositors suffered greater deposit runoffs when market interest rates increased during 2022-2023, reducing the economic value generated per dollar of deposits by approximately 30%. Our findings suggest that assessments of bank stability could benefit from incorporating information on a bank's depositor base.
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The rank-size rule and challenges in diversifying commercial real estate portfolios
The Journal of Real Estate Finance and Economics2023
The strategy of geographically diversifying a portfolio of commercial real estate assets is an intuitive approach for risk management. However, due to high concentrations of these assets in major metropolitan areas, investors may face additional constraints in the portfolio optimization process. The rank-size rule, a log-linear relationship between city rank and size, provides one of the greatest empirical regularities in regional science. As such, it serves as a possible theoretical guide to the weights given to properties by location in a commercial real estate portfolio. This paper sets forth some ideas relating to the concentration side of portfolio variance and the limiting effect that large concentrations may have on the ability to diversify risk.
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Valuation when disaster risks increase at an increasing rate
Economics Letters2023
Atmospheric CO 2 been growing at an increasing rate for many years and this suggests that investments may face an increasing rate of future disaster risk. We provide a simple variation of the Gordon Growth model that accounts for potential increasing disaster risks and provides a closed-form bound to the reduction in value.
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Demographic, jurisdictional, and spatial effects on social distancing in the United States during the COVID-19 pandemic
PLOS ONE2020
Social distancing, a non-pharmaceutical tactic aimed at reducing the spread of COVID-19, can arise because individuals voluntarily distance from others to avoid contracting the disease. Alternatively, it can arise because of jurisdictional restrictions imposed by local authorities. We run reduced form models of social distancing as a function of county-level exogenous demographic variables and jurisdictional fixed effects for 49 states to assess the relative contributions of demographic and jurisdictional effects in explaining social distancing behavior. To allow for possible spatial aspects of a contagious disease, we also model the spillovers associated with demographic variables in surrounding counties as well as allow for disturbances that depend upon those in surrounding counties.
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Price Discovery in the Residential Mortgage-backed Security, Credit Default Swap, and ABX Markets
Credit Default Swap, and ABX Markets2020
This paper analyzes price discovery among residential mortgage-backed securities (MBS), their credit default swaps (ABCDS), and the associated ABX contracts. VECM regressions show that the MBS and ABX markets lead price discovery over the ABCDS market. Neither the MBS nor the ABX market consistently dominate one another so that MBS and ABX markets respond to information simultaneously. Thus, while there is evidence that ABCDS were mispriced, there is no evidence for ABX market “overshooting” that was previously thought to have helped cause the recent mortgage market bubble and bust.
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