Research Interests: Urban Economics, Environmental Economics, Economics of Innovation, Industrial Organization
Hongyu Xiao is a 4th year doctoral student in the Applied Economics program. His research interests lies at the intersection of urban economics, environmental economics, economics of innovation and industrial organization. He graduated from Cornell University in 2011 with a B.A. in Astronomy (honors) and Economics (honors).
Hong Yu Xiao and Hector Perez-Saiz (Working), Cultural Affinity, Regulation and Market Structure: Evidence from the Canadian Retail Banking Industry.
Abstract: We estimate a perfect information static entry game to study the importance of cultural and regulatory entry barriers on the competitiveness and geographic presence of retail depository institutions in Canada. The Canadian banking industry provides a good setting for analysis because it has high linguistic diversity in a dual regulatory banking system context, which allows us to separately identify the effect of cultural from regulatory entry barriers. We find that cultural affinity plays an important role to explain the significant comparative advantages some credit unions and banks have relative to other financial institutions. In several counterfactual experiments, we show that the effectiveness of certain market strategies and regulations intended to foster competition are significantly limited by the cultural barriers, which is a key determinant that shapes the competitive landscape of the industry.
Hong Yu Xiao and Fuchun Li (Under Revision), Comparative Approaches in Predicting Financial Stresses in Canada.
Abstract: We propose a new early warning model for predicting the likelihood of the occurrence of a financial stress event for a given future time. In this model, we examine whether credit plays an important role as a nonlinear propagator of shocks when predicting the likelihood of a financial stress event for a given future time. This propagation takes the form of a threshold regression in which a regime change occurs if credit conditions cross a critical threshold. The in-sample and out-of-sample forecasting evaluations suggest that the new early warning model is a useful tool to predict the likelihood of a financial stress event at a given future time. In particular, the out-of-sample forecasting results suggest that the model based on the credit-regime switching approach outperforms the benchmark models based on a linear regression and signal extraction approach across all forecasting horizons and all criteria considered, providing empirical evidence of the importance of credit as a nonlinear propagator of shocks to predict the likelihood of the financial stress events.
Abstract: A worker's commuting distance to the workplace may have implications for her productivity through channels such as costly travel time and reduced knowledge spillovers, and these costs may drive observed agglomerative spatial patterns previously identified in the literature. However, there has been little prior work identifying and measuring the exact cost. We estimate the effect of distance between a worker's residence and workplace on her productivity on a sample of US inventors. Utilizing precise data on residences and workplaces, we exploit within-city firm office relocations as exogenous shocks to commuting distance to eliminate the effects of residential sorting. We find that distance has a significant negative causal effect on inventor productivity; a 1 km increase in distance is associated with a 1 to 2% decrease in productivity. Our paper has implications for work on economic geography and productivity.
This course will introduce you to "managerial economics" which is the application of microeconomic theory to managerial decision-making. Microeconomic theory is a remarkably useful body of ideas for understanding and analyzing the behavior of individuals and firms in a variety of economic settings. The goal of the course is for you to understand this body of theory well enough so that you can effectively analyze managerial (and other) problems in an economic framework. While this is a "tools" course, we will cover many real-world applications, particularly business applications, so that you can witness the usefulness of these tools and acquire the skills to use them yourself. We will depart from the usual microeconomic theory course by giving more emphasis to prescription: What should a manager do in order to achieve some objective? That course deliverable is to compared with description: Why do firms and consumers act the way they do? The latter will still be quite prominent in this course because only by understanding how other firms and customers behave can a manager determin what is best for him or her to do. Strategic interaction is explored both in product markets and auctions. Finally, the challenges created by asymmetric information - both in the market and within the firm - are investigated.
2017 Mack Institute for Innovation Management Research Grant
2016 Kleinman Center for Energy Policy Research Grant
2016 IWFSAS 2016 Best Paper Award
2016 Mack Institute for Innovation Management Research Grant
2016 Wharton Doctoral Travel Grant
2015 Amy Morse Prize
2014 Wharton Public Policy Initiative Fellowship
2014 Wharton Doctoral Program Fellowship