Presenter: Assistant Professor Yi Yu (Nankai University)
Host: Xu Rui, Assistant Professor (Institute of Chinese Economy, Liaoning University)
Guest Introduction: Hou Shangdi, Assistant Professor (Institute of Chinese Economy, Liaoning University)
Date: April 11, 2024 (Friday) 14:00 - 15:30 (Beijing Time)
Location: Conference Room on the First Floor of Wuzhouyuan, Chongshan Campus, Liaoning University
Online address: Tencent Meeting 358-6417-4104
Language: Chinese/English
Abstract:
This study investigates how bank expertise in identifying productive projects shapes economic structures. Utilizing the U.S. interstate banking deregulation of the 1980s as a quasi-natural experiment, we find that deregulation facilitated the convergence of economic structures across states. This effect is particularly pronounced among state pairs with significantly different pre-deregulation economic structures or when one state depends on external finance while the other is more financially developed. We then develop a general equilibrium model embedded in a Lucas-island framework featuring imperfect searching and matching between banks and firms. Calibrated to U.S. data, our model accounts for approximately half of the observed convergence of economic structures between service- and manufacturing-dominated states following deregulation. Furthermore, while deregulation enhances welfare, banks may deviate from the socially optimal level of entry, either under- or over-penetrating markets, due to pricing power and labor displacement effects. The extent of these deviations is determined by banks’ entry costs and market concentration.
Speaker's Profile:
Dr. Yu Yi is an Assistant Professor at the Nankai University. He earned his Ph.D. in Economics from the London School of Economics and Political Science in 2023. Before that, he earned his Msc in EME from LSE, and B.A. in Economics and B.S. in mathematics from Wuhan University. His research interests include macro finance and banking. He was awarded the Rising Star Award by the Chinese Economic Society in 2023.
