Research
Working Papers
The Impact of Air Connectivity on International Travel: Evidence from Cross-border Card Payments
with Chun-Yu Ho, Haruka Takayama, and Li Xu. (Job Market Paper)
Abstract: Many countries seek to attract foreign travelers. How do direct flight connections affect the spending of international visitors? A novel dataset on card payments made by Chinese travelers through point-of-sale (POS) terminals enables us to investigate that question. We instrument for the frequency of direct flights between Chinese cities and foreign countries by exploiting overseas airport expansions as exogenous shocks. Our IV estimates indicate that a 1% increase in the weekly frequency of direct flights leads to a 2% increase in cross-border card transaction value. This suggests that in a city with the average frequency, adding one extra weekly direct flight increases the value of transactions by 52% to the destination country. While improving air connectivity promotes international travel, we find that negative shocks to consumer preferences for destination countries, such as boycotts, diminish the positive impact of air connectivity.
Competitive Effects of Regional Airline Exit: Evidence from the COVID-19 Pandemic
with Chun-Yu Ho and Li Xu.
Abstract: We examine the competitive effects of regional airline exits on the U.S. airline industry, leveraging the COVID-19 pandemic as a natural experiment. Using propensity score matching and difference-in-differences strategies, we find that consumers are worse off, on average. When regional airlines exit, there is a significant decrease in both market flights and capacity, with no immediate replacements. Additionally, market airfare rose by roughly 3.7%. Further, at the airline level, incumbent carriers increased flights and capacity by 11.7% and 12.2%, respectively. Low-cost and smaller carriers, in particular, captured more markets but offered worse on-time performance and higher prices. In summary, our findings reveal the multifaceted nature of competition dynamics in the airline industry, providing insights for the design of effective regulatory and competitive policies to benefit consumers.
Human Capital Accumulation, Trade, and China’s Firms Innovation, in Chinese
with Liang Zhang, Bin Qiu, and Lamei Wu (forthcoming in China Economic Quarterly, published by Peking University Press)
Abstract: Human capital is an important factor in driving economic growth. This paper uses the DID method to identify the causal effects of human capital accumulation on Chinese firms’ innovation. We find that human capital accumulation has a significant positive effect on firms’ innovation behavior and quality. In addition, trade is the key mechanism. Human capital accumulation promotes firms’ innovation through both the “factor aggregation effect” brought by import competition and the “market expansion effect” by learning effects in the export markets. The results reveal the necessity of human capital accumulation and the importance of innovation through trade openness.
Work in Progress
Industrial Policy and Comparative Advantage: Evidence from Global Shipbuilding Industry
with Chun-Yu Ho.