Paul W. Dai

Paul W. Dai

Finance PhD Student at MIT Sloan

Welcome!

I am a first-year finance PhD student at MIT Sloan School of Management, where I previously worked as a Predoc fellow. I obtained my MA in Economics from the University of Chicago in 2022, and my BA in Economics and Literature from Peking University, China, in 2021. Here is my CV.

My research lies at the intersection of finance, macroeconomics, and development. Methodologically, I leverage large-scale granular data, conduct reduced-form analysis with causal identification, and combine it with quantitative models to disentangle potential channels.

Working Paper

Credit Allocation, Collateral, and Economic Development (with Karsten Müller and Emil Verner)

  • PDF Link; SSRN; Data Website: Global Credit Project; Slides Link
  • Presentation: AFA 2025 Annual Meeting: Finance, Development, and Growth; NBER 2025 Spring: International Finance and Macroeconomics Program Meeting; SED Annual Meeting 2025
  • Abstract: This paper studies the interplay between the sectoral allocation of credit and long-run economic development. We document new Financial Kuznets Facts: as economies grow, (i) the share of manufacturing credit relative to value added falls, (ii) the share of real estate credit rises, and (iii) the reliance on and price of real estate collateral increase. A two-sector structural change model with collateral constraints explains these patterns through an economic channel (a rise in manufacturing productivity) and a financial channel (a relaxation of real estate financing constraints). We provide several pieces of reduced-form evidence that the financial channel asymmetrically increases real estate credit over development. Further, new data reveal that the liberalization of directed credit policies is associated with a reallocation of credit from manufacturing to real estate, as such policies historically prioritized manufacturing. Finally, we document that manufacturing credit predicts higher long-run growth, while real estate credit predicts lower growth, suggesting that the allocation of credit may matter for understanding long-run growth.