Essays on household demand, housing supply and airline operational performance

• Online Access: http://hdl.handle.net/2047/D20316357

This dissertation consists of three chapters in applied economics with addressing socially important questions in household demand, housing supply, and airline operational performance. The household consumption is the main and the most significant part (usually around 40%) of national Gross Domestic Product in China. Therefore, detailed knowledge of the household expenditure behavior is a relevant and essential matter for both tax and social-policy making as well as for the production side. In this first chapter, I use the Almost Ideal Demand System (AIDS) model and an annual province level panel data to estimate the allocation of household expenditure on seven goods and services groups for the urban households in China between 1998 and 2013, namely, food, clothing, household facilities, medicine and medical services, transportation and communication, education, and housing. 1998 is a turning point for China's housing market as China abolished the welfare housing system in this year and as a result, people must buy homes on the market for themselves from then on. From 1998 to 2013, three times government regulatory adjustments divide the development of China's housing market into three stages, I incorporate the influence of these government adjustments into the demand system estimation and test the effectiveness of these policies. I then use the estimated coefficients to carry out a counterfactual simulation of what consumer welfare would have been, had a 0.6% property tax been charged on housing. My results indicate that food, clothing, medicine and medical services are necessities while the other goods are luxuries; Household facilities and housing are among the most elastic with their estimated own-price elasticities being lower than -2; The third stage (2008-2013) government regulatory adjustments were effective in stimulating people's demand for housing while the second stage (2003-2007) policy adjustments failed as households' demand for housing had not fallen as the policies aim; I also find that under the scenario of a uniform 0.6% Ad valorem property tax been imposed on housing, households would experience an annual welfare loss of 420 yuan per capita, this amount is about 20% of the national average monthly wage of urban workers in the sample period; Beijing, Shanghai, and Guangdong, would have the highest welfare losses of 684 Yuan, 734 Yuan, and 608 Yuan respectively, and these three provinces are the top regions in terms of the living cost; The welfare loss increases as time goes on during the sample period except 2009 which is 5 Yuan lower than the previous year which reflects the influence of the Global Financial Crisis. A crucial factor in understanding the housing market is understanding the supply. In the second chapter, I estimate a housing supply model and compare the main determinates of housing supply during the boom and the bust in the Great Recession by using a panel dataset covers 46 metropolitan areas in the U.S. between 2001 and 2015. I compare the regulatory, geographic constraints and factors that are pertaining to the market which are suspected to influence investors' investment decision, such as the share of houses that are sold at lower prices than the previous sale price and the percentage of homes in a region with values that have increased in the previous year. Instrument variable technique is used to deal with the price endogeneity issue. The results indicate that more restrictive residential land use regulatory constraint is linked to a significant decrease in housing permits issued in the boom period; However, more restrictive geographic constraint leads to less housing supply in the bust period. Besides the man-made and natural constraints, higher proportion of homes that are sold at lower prices leads to less housing investment in both periods; on the other side, higher proportion of homes that have value increased in the previous year results in significant increase in housing construction in both boom and bust periods. The unbundling of checked baggage services from the base fare has been a popular strategy among U.S. airlines. The third chapter seeks to evaluate the impact of unbundling checked baggage fees on the U.S. airlines' operational performance as measured through the on-time arrival performance. I study a sample of U.S. domestic nonstop routes between 30 core airports operated by eleven major airlines over the period 2006-2010. I show that, on an average route, implementing a checked baggage fee policy resulted in better on-time performance. Furthermore, the improvement was higher on the hub-origin routes but lower on the hub-destination routes, on the routes with a higher concentration level, and during the Great Recession. Compared to no implementation of checked baggage fee, after the implementation of baggage fee the arrival delays decreased by 2.2 percent on the routes with concentration level (measured by HHI) of 0.4, and this reduction was about 1.7 percent on routes with the concentration level of 0.8; And the arrival delays had been improved the most on hub-origin routes compared to non-hub routes, hub-destination routes and hub to hub routes. Overall, the hub-destination routes performed better than the hub-origin routes in terms of on-time arrivals. Given the high level of congestion in the hub airports and the substantial cost to carriers to rebook passengers onto new connections, this finding is in line with airlines' operational strategy that they had greater incentive to keep the flights flying into their hub airports from a delay than the flights flying out of their hub airports. My study is among the first to quantify the impact of checked baggage fee policy on the on-time arrival performance of U.S. airlines with allowing for heterogeneity across routes.