Alex Xi He

Assistant Professor of Finance

University of Maryland

Research interests: corporate finance, labor and finance, innovation, financial intermediation




4411 Van Munching Hall

Robert H. Smith School of Business

University of Maryland

College Park, MD 20742


Abstract: This paper studies the causal effect of liquidity constraints on individual labor market outcomes by exploiting a mortgage reform in Denmark in 1992, which for the first time allowed homeowners to borrow against housing equity for non-housing purposes. We find that following the reform, liquidity-constrained homeowners extracted housing equity, increased debt levels, and had higher earnings growth and lower employment rates. In contrast, the reform had small and opposite effects on the earnings and employment rates of homeowners with high liquid asset holdings. The option to borrow against housing equity enables liquidity-constrained individuals to move to high-wage jobs and invest in valuable human and physical capital. The results imply that relaxing household liquidity constraints during recessions can create better job matches and potentially increase earnings and output in the longer run.

2. "A Theory of Intermediated Investment with Hyperbolic Discounting Investors." With Feng Gao and Ping He, Journal of Economic Theory, 2018.

Abstract: Financial intermediaries may reduce welfare losses caused by hyperbolic discounting investors, who may liquidate their investment prematurely when the liquidation cost is low. In a competitive equilibrium, sophisticated investors are offered contracts with perfect commitment, and first best results are achieved; naïve investors are attracted by contracts that offer seemingly attractive returns in the long run but introduce discontinuous penalties for early withdrawal. If the investor types are private information, naïve investors withdraw early and cross-subsidize sophisticated investors. When a secondary market for long-term contracts opens for trading, financial intermediaries are compelled to offer contracts that have more flexible withdrawal options with linear schemes, and the welfare of naïve investors is improved. Arbitrage-free linear contracts allow for a unique term structure for interest rates that includes a premium for naïveté. Solvency requirements may limit competition for contracts and result in positive profits; banks that have capital are able to compete more aggressively, which improves investor welfare.

Working Papers

Abstract: This paper studies how federal funding affects the innovation outputs of university researchers. We link person-level research grants from 22 universities to patent, publication, and career outcomes from the U.S. Census Bureau. We focus on the effects of large, idiosyncratic, and temporary cuts to federal funding in a researcher’s pre-existing narrow field of study. Using an event-study design that controls for principal investigator fixed effects, we document that these negative federal funding shocks reduce high-tech entrepreneurship and publications but increase patenting. The lost publications tend to be higher quality and more basic, while the additional patents tend to be lower quality, less general, and more often privately assigned. Overall, the federal funding cuts push researchers away from more open research with greater impact on future knowledge, and towards more subsequently appropriated research. The level of funding explains the effects on publications, while the source of funding—federal vs. private—appears to play an important role in the effects on high-tech entrepreneurship and patents. Together with evidence from industry contracts, the results suggest that shifting university research funding from federal to private sources leads to more appropriation of intellectual property by corporate sponsors.

Abstract: This paper provides evidence from the US and Denmark that managers with a business degree (“business managers”) reduce their employees’ wages. Within five years of the appointment of a business manager, wages decline by 6% and the labor share by 5 percentage points in the US, and by 3% and 3 percentage points in Denmark. Firms appointing business managers are not on differential trends and do not enjoy higher output, investment, or employment growth thereafter. Using manager retirements and deaths and an IV strategy based on the diffusion of the practice of appointing business managers within industry, region and size quartile cells, we provide additional evidence that these are causal effects. We establish that the proximate cause of these (relative) wage effects are changes in rent-sharing practices following the appointment of business managers. Exploiting exogenous export demand shocks, we show that non-business managers share profits with their workers, whereas business managers do not. But consistent with our first set of results, these business managers show no greater ability to increase sales or profits in response to exporting opportunities. Finally, we use the influence of role models on college major choice to instrument for the decision to enroll in a business degree in Denmark and show that our estimates correspond to causal effects of practices and values acquired in business education—rather than the differential selection into business education of individuals unlikely to share rents with workers.

Abstract: This paper examines whether and how managerial styles affect worker wages. Using a matched manager-firm-worker dataset covering the entire population of Denmark from 1995 to 2011, we establish that some managers are more generous and pay higher wage premiums to their workers. Manager styles in wage-setting are persistent over time and can be predicted by managers' ex-ante personal characteristics. The heterogeneity in manager-specific wage premiums explains about 40% of the between-firm wage inequality. We also show that higher manager-specific wage premiums are associated with higher manager turnovers. In particular, mergers and acquisitions tend to displace high-paying managers and reduce wages, therefore redistributing wealth from workers to shareholders.

Abstract: We study the use and economic impact of artificial intelligence (AI) technologies among U.S. firms. We propose a new measure of firm-level AI investments, using a unique combination of detailed worker resume and job postings datasets. Our measure reveals a stark increase in AI investments across sectors in the last decade. AI-investing firms see higher growth in sales, employment, and market valuations. We use a novel identification strategy, instrumenting firm-level AI investments with firms' ex-ante exposure, based on alumni networks, to the supply of AI-skilled labor from universities historically strong in AI research. The positive growth effect of AI comes primarily through increased product innovation, reflected in trademarks, product patents, and updates to product portfolios. AI-powered growth concentrates among the ex-ante largest firms, leading to higher industry concentration and reinforcing winner-take-most dynamics. Our results highlight that new technologies can contribute to growth through product innovation.

Abstract: We study the shifts in U.S. firms’ workforce composition and organization associated with the use of AI technologies. To do so, we leverage a unique combination of worker resume and job postings datasets to measure firm-level AI investments and workforce composition variables, such as educational attainment, specialization, and hierarchy. We document that firms with higher initial shares of highly educated workers and STEM workers invest more in AI. As firms invest in AI, they tend to transition to more educated workforces, with higher shares of workers with undergraduate and graduate degrees, and more specialization in STEM fields and IT and analysis skills. Furthermore, AI investments are associated with a flattening of the firms’ hierarchical structure, with significant increases in the share of workers at the junior level and decreases in shares of workers in middle-management and senior roles. Overall, our results highlight that adoption of AI technologies are associated with significant reorganization of firms’ workforces.