Commercial Retail

Clicks and Bricks: The Complementarity of Online Retail and Urban Services [Updated January 2024]

Is online retail a complement or substitute to local offline economies? To answer this question, I use transaction data and the staggered introduction of online grocery platforms as a natural experiment. I find that online retail activity reallocates consumer purchases towards offline services, particularly restaurants, through time savings. I also find that it changes how consumers make shopping trips, creating additional positive and negative spillovers. Thus, online retail is both a complement and substitute to different types of offline brick-and-mortar stores. I then develop a discrete choice model that replicates consumers' nuanced trip substitution patterns. The model predicts that a mature online grocery market will shift consumption from offline goods to services in high-income urban areas.

The Impact of Work-from-Home on Brick-and-Mortar Retail Establishments: Evidence from Card Transactions (with James Duguid, Bryan Kim, and Chris Wheat) [Updated June 2023]

We build a novel dataset tracking retail establishments based on billions of card transactions to study the impact of COVID-19 induced work-from-home (WFH) on brick-and-mortar retail locations. We find that retail establishments have paralleled the exodus of populations from large, expensive cities and city centers in preference for smaller Sun Belt cities and suburbs. In contrast to office markets, the negative behavioral impact of WFH on retail establishment growth is strongest near residential locations. The effects are also negative where nearby workers transitioned to WFH and for establishments with products tied to in-office employment.

The Early Impact of COVID-19 on Local Commerce: Changes in Spend Across Neighborhoods and Online (with Marvin Ward, Chris Wheat, and Diana Farrell)
CEP Occasional Paper, Paper No. CEPOP50
Covid Economics, Issue 28

We document a number of striking features about the initial impact of the pandemic on local commerce across 16 US cities. There are two novel contributions from this analysis: exploration of neighborhood-level effects and shifts between offline and online purchasing channels. In our analysis we use approximately 450 million credit card transactions per month from a rolling sample of 11 million anonymized customers between October 2019 and March 2020. Across the 16 cities we profile, consumers decreased spend on the set of goods and services we define as ``local commerce" by 12.8% between March 2019 and March 2020. Growth in all 16 cities was negative. Consumers shifted a substantial share of local commerce spend online, such that year over-year growth in online spend was small, but positive, at 1.5%. With respect to grocery and pharmacy purchases, online spend grew at least three times as fast as offline spend. Overall spend declines were uniform across neighborhoods of differing median household income, though lower-income neighborhoods experienced the highest proportion of extreme negative declines. We also find evidence that many low-income neighborhoods are increasing spend on online grocery slower than others, but increasing their use of online restaurants the fastest. Consumers in low-income neighborhoods also tend to live farther from the grocery stores at which they shop. Compared to their counterparts in higher-income neighborhoods, consumers in low-income neighborhoods have not been more likely to shop at grocery stores closer to where they live since the onset of the pandemic.

 Mortgage Markets

Affordability, Financial Innovation, and the Start of the Housing Boom (with Benjamin Keys and Jane Dokko) [Updated July 2022]

At their peak in 2005, roughly 60 percent of all purchase mortgage loans originated in the United States contained at least one non-traditional feature. These features, which allowed borrowers easier access to credit through teaser interest rates, interest-only or negative amortization periods, and extended payment terms, have been the subject of much regulatory and popular criticism. In this paper, we construct a novel county-level dataset to analyze the relationship between rising house prices and non-traditional features of mortgage contracts. We apply a break-point methodology and find that in housing markets with breaks in the mid-2000s, a strong rise in the use of non-traditional mortgages preceded the start of the housing boom. Furthermore, their rise was coupled with declining denial rates and a shift from FHA to subprime mortgages. Our findings support the view that a change in mortgage contract availability and a shift toward subprime borrowers helped to fuel the rise of house prices during the last decade.

Branches in Local Mortgage Markets

This paper studies the impact of branch presence on mortgage credit outcomes in the surrounding neighborhood using the density of nearby branch networks to instrument for actual branch presence. I find that lenders with branches lend more mortgages to borrowers in the surrounding neighborhood and that those operated by local lenders have the most positive impact for low socioeconomic-status borrowers. However, I show that branches disadvantage competing lenders by lowering the credit-quality of the competing lenders' applicant pool. This adverse selection causes an aggregate negative effect of branch presence on neighborhood mortgage outcomes.