Essays on market structure and trade [electronic resource]

In the first chapter of this dissertation I study how airlines schedule their flights in response to airport congestion. Access to scarce runway capacity at most airports in the United States is allocated by queuing, creating the scope for congestion externalities. Unlike a classic ``tragedy of the commons", congestion externalities from airline decisions can be strategic. Airlines regularly schedule more departures than an airport's runways can handle without delay, and delay to the average US passenger was 50 minutes in 2007. I develop an empirical framework for airline schedule choices that accounts for benefits from scheduling flights close together in time - such as enabling connections and serving demand at preferred times of day - and the effect of congestion, which has both a cost and the strategic benefit of deterring entry by competitors. I use an engineering model of runway capacity and queuing to construct measures of marginal congestion, but the measures are endogenous in an airline's scheduling choice because they depend on other schedules. I exploit variation in runway capacity due to weather patterns within the day and across seasons, together with excluded variation in the schedules of rival users of the runway to estimate the effect of marginal congestion on airline scheduling at hub and spoke airports. I find that airlines trade-off benefits from connections and passenger preferred times against the cost of increased congestion, but this cost is outweighed at hubs by the strategic entry deterrence benefit of congesting peak times. The effect is larger at times that are more valuable to competitors. In the second chapter I study the relationship between the languages that are spoken in a country and the country's patterns of foreign trade. Foreign trade involves tasks that may be subject to language barriers, such as researching foreign markets, communicating with counterparties and marketing products to foreign consumers. Language skills have a wage premium that is determined by local and worldwide supply and demand for language services, and the premium is specific to each country and pair of languages. I construct a novel measure of language skill premia based on professional rates for translation services from an online market. The skill premium measure relies on the bi-directional nature of the translation cost data to control both for difficulties inherent in defining a unit of account (as the per word ``piece-rates'' common in the translation industry do not embody equal amounts of work across languages) and the skilled-wage component of rates. I develop an estimation strategy based on overlaps in ethnolinguisitic populations to estimate the effect of the language skill premium as a cost barrier to trade, net of confounders such as trade by shared ethnic populations. I find that accounting for country and language-specific language barriers yields a three-fold increase in the estimated effect of language on foreign trade, relative to current estimates based on a shared common language. The effect of language is stronger for relatively more differentiated products.

Keywords: Economics.
Advisor: Bresnahan Timothy F. primary advisor. Thesis advisor
Levin Jonathan
Manova Kalina