With Ulrike Malmendier
Journal of Monetary Economics, 2022
Homeownership is considered an essential part of the ``American Dream'' and forms the foundation of upward mobility. We show that the upward mobility of children from low-income families is not predicted by homeownership rates, but by homeownership segregation. Higher residential segregation between homeowners and renters predicts lower upward mobility of children from low-income families, while not affecting high-income families. We hypothesize the 1968 Fair Housing Act preserved homeownership segregation in CZs since the 1970s, and feature more land-use regulation even today. Channels mediating the effect of homeownership on upward mobility include income segregation, racial segregation, school segregation, and commuting times.
Homeownership segregation and homeownership rates
With S. K. Ritadhi, Siddharth Vij, and Kate Waldock
Management Science, 2025
PRESENTATIONS: IIM Calcutta-NYU Stern India Research Conference 2019 | NSE-NYU conference 2019 | IMF 2019 | Delhi Winter School 2019 | ISI 2019
The secular rise of "zombie" borrowers, insolvent firms sustained by continued extension of credit by complicit banks, has been a source of concern for mature and emerging economies alike. Using supervisory data on the universe of large bank-borrower relationships in India, we introduce a novel method for identifying zombies. Although there was widespread non-disclosure of zombies in India in 2014, the beginning of the sample period, there have been major improvements since. We examine changes in zombie reporting around two key policy changes: an overhaul of the bankruptcy code and a regulatory intervention removing lender discretion in bad loan recognition. Increases in reporting were modest after the bankruptcy reform but there was a sizable jump in the recognition of zombies after the regulatory intervention. Post-intervention results show that lending has been reallocated to large, healthy borrowers. However, under-reporting still exists, particularly among public-sector banks. Overall, our results indicate that regulatory action might be necessary, above and beyond bankruptcy reform, to target zombie lending
Impact on non-performing loan recognition post bankruptcy laws
With S. K. Ritadhi and Abhay Aneja
Journal of Empirical Legal Studies, 2021
PRESENTATIONS: VAT conference 2019 organized by University of Michigan/Columbia/World Bank | NEUDC 2019 | Eighth Delhi Macroeconomics Workshop 2019
We study the impact of consumption tax reform on firm capital and productivity by examining the replacement of the pre-existing sales tax with the value-added tax (VAT) in India. VAT allowed firms to offset their tax liability with VAT paid on capital inputs, effectively reducing capital costs. Exploiting the staggered adoption of VAT across states, we show that exposure to VAT increases firm capital. Effects are driven by the most financially constrained firms, with a 26\% increase in capital. As a result, the firm productivity of financially constrained firms improves post VAT. Our findings suggest that consumption tax reforms can stimulate investment and productivity of financially constrained firms.
Impact on VAT on plant and machinery
With Bhavya Agarwal and S. K. Ritadhi
The Review of Corporate Finance Studies, 2023
PRESENTATIONS: AEL Berlin 2019 | EEA 2019 (Withdrawn) | DIAL 2019 | NBER SI 2019 (Withdrawn) | AFA 2020 (Scheduled)
This paper examines whether a one-time, extensive, but temporary shock to cash supply can affect the adoption of digital payments. We exploit the 2016 demonetization episode in India, which overnight discontinued 86% of cash in circulation. Using novel administrative data from retail debit card transactions, we identify a 12% increase in digital payments in areas adversely affected by the cash shortage, which persisted well after the restoration of cash supply. Examining mechanisms, we find a limited role for social networks and stronger support for learning by doing. Further, information frictions hinder the immediate adoption of digital payments. (JEL E5, 023)
Impact of demonetization on digital transactions
With Kaushalendra Kishore and Saurabh Roy
Journal of Corporate Finance, 2025
This paper provides evidence of a new cost of fire sales: zombie lending by banks. Banks with high market share are more likely to internalize the negative spillovers of falling collateral prices during a fire sale. To prevent prices from falling further during a fire sale, these banks do not liquidate defaulted firms and instead give zombie loans to keep them alive. Using structural breaks in real estate prices to identify periods of fire sales in different MSAs, we provide evidence that banks with high market share give zombie loans to firms with relatively higher real estate assets during a fire sale. Further, congestion due to zombie firms in an industry reduces the investment and profitability of healthier firms. Overall, we highlight a new mechanism for zombie lending resulting from reduced collateral liquidation in markets prone to fire sales.
Number of MSAs having a fire sale