RESEARCH STATEMENT
JULES O. YIMGA
Department of Economics, Kansas State University
My research agenda broadly falls within the field of Industrial Organization (IO) and primarily focuses on empirical methods applied to the airline industry and Development Economics. This research statement is organized as follows. The first section discusses my work
on the Airline Industry. The second section discusses my work on Development Economics.
In the third section, I briefly describe my plans for future research.
1. Research on the Airline Industry
Since the mid-1990s, major airlines that serve the US domestic market have increasingly found it appealing to form alliances. Amidst the recent emergence of airline alliance
formation, my research has sought to answer questions on the product quality implications
of policies regarding cooperation among airlines in the US domestic air travel industry. A
challenge that empirical work faces in studying the relationship between airline alliances
and product quality is to find reasonable measure(s) of product quality. My research extends pioneering works by McFadden (1974), Berry (1994), and Berry et al. (1995), among
others, to model and estimate consumer demand in markets with differentiated products by
incorporating reasonable airline product quality measures to understand how airlines’ and
passengers’ choice behavior responds to changes in product quality.
The On-Time Performance Effects of Airline Alliances. One measure of airline product quality is airline on-time performance (OTP). Although flight delay has always received
much attention, we are unaware of any empirical research that measures the OTP effects
of domestic airline alliances. In my first dissertation essay “Airline Code-sharing and
Its Effects on On-Time Performance” (paper won the 2015 Department of Economics
Best Graduate Paper Award ), I empirically investigate the OTP effects of the largest US
domestic alliance that began in June 2003—an alliance between Delta Air Lines, Northwest Airlines and Continental Airlines. I find evidence that code-sharing improves alliance
partners’ OTP and that the size of the alliance effect on OTP depends on pre-alliance competition in a market, with the effect being larger in markets where the partners competed
in prior to the alliance.
The Economics of Airline Alliance Routing Quality. Airline carriers typically coordinate to seamlessly integrate their route networks which potentially result in more travelconvenient route network connections across partner carriers. The question that my second
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JULES O. YIMGA Department of Economics, Kansas State University
essay “Airline Alliance and Product Quality: The Case of the U.S. Domestic Airline Industry” co-authored work with Philip Gayle, intends to shed light on is whether the
route network integration that comes with the alliance provides sufficient extra incentive
to partner carriers to improve their flight routing quality. Evidence suggests that routing
quality for Delta/Continental/Northwest’s—our alliance of interest—products decrease in
markets with pre-alliance competition resulting in substantial negative welfare effects for
passengers. In fact, routing quality of DL/NW/CO products decreased by 0.256% below
the mean routing quality of the entire samples products. More interestingly, the codeshare
effects in specific markets where the alliance firms competed prior the alliance, are also
negatively associated with routing quality of the alliance firms’ products, resulting in a fall
in consumer utility of $0.5 per consumer.
Why are Airlines Late? Airlines usually claim that air travel delays are out of their
control, placing the blame on adverse weather or air traffic control as the most common
reasons. Despite these claims, data on causes of flight delay reveal that the share of delay
caused by weather and air traffic control has been on the decline while the share of delay
caused by airlines has been on the rise. This suggests that on-time performance improvement is well within the reach of carriers. In my third essay “Modelling the Impact of
Airline Product Quality on Passengers Choice Behavior,” co-authored work with
Philip Gayle, we investigate why airlines have little or no incentive to improve OTP. We
also measure the cost of delay borne by consumers in terms of how much monetary value
they are willing to pay to avoid delay. We find that consumers are willing to pay $0.78 for
every minute of arrival delay which after extrapolation amounts to consumer welfare effects
of $1.76 billion. Our findings suggest that airlines have little to no incentive because their
markups do not increase when they improve on-time performance. In fact, the marginal
increase in price resulting from on-time performance improvement is offset by an increase
in marginal cost causing a zero net effect on markup.
An Empirical Investigation of the Competitive Effects of Domestic Airline
Mergers. Anticompetitive effects of airline mergers due to increases in market concentration are a major concern for government regulators. Markets that are most susceptible
to higher concentration are those where the merging airlines offer competing services. However, these overlapping markets may experience some pro-competitive effects stemming from
the possibility of cost efficiency gains that could translate into lower airfares. Therefore, the
overall competitive effect in these overlapping markets is not clear. Most post-merger analyses have primarily focused on price effects rather than merger effects on cost or markup. In
“Merger Cost Effects based on Existence of Pre-merger Competition between
Merger Firms” co-authored work with Huubinh Le, we empirically examine the effects of
two recent mergers–Delta/Northwest and United/Continental—on product marginal cost
and markup, specifically in markets where the merging airlines previously competed. We
find that both mergers are associated with lower marginal costs but higher markups for
RESEARCH STATEMENT
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products in markets where the merging airlines previously competed. The magnitude of
the marginal cost decrease is greater than the increase in markup.
2. Research on Development Economics
My research on Development Economics has focused primarily on microfinance—the
provision of banking/financial services to non-traditional customers known as poor and
low-income households or businesses. The microfinance industry worldwide experienced an
unprecedented high growth phase between 2004 and 2008 that has left practitioners wondering if this high growth phase led to decreased quality in loan portfolio. In “The Impact
of High Microfinance Growth on Loan Portfolio,”(Yimga, 2015) forthcoming in the
Journal of International Development, I show that loan portfolio quality actually improved
with the growth surge in microfinance activities. In another paper “Mitigating Loan
Repayment Troubles during Microfinance Expansion: Evidence from a Large
Panel” (under review), I use panel methods to tests whether the surge in microfinance lending during the boom years of 2004–2008 hurt loan repayment rates. Surprisingly, evidence
suggests that loan delinquency is inversely related to microfinance growth. This result is
contrary to the long-standing view that fast microfinance expansion leads to increased loan
delinquency. This suggests the existence of a larger pool of high quality borrowers that
have not yet been tapped in new markets.
On a separate paper “On the Productivity of Microfinance Institutions” coauthored work with Bebonchu Atems, we investigate productivity changes of 953 MFIs
in 101 countries across 5 regions: Africa, East Asia and the Pacific, Eastern Europe and
Central Asia, Latin America and The Caribbean, Middle East and North Africa, South
Asia, over a period of 5 years (2009–2013) by using the Malmquist productivity index
(MPI) method. By decomposing the Malmquist index, the results show that during the
study period, microfinance institutions experienced mainly an increment of pure technical
efficiency rather than an improvement in optimum size. Overall, an essential strategic
implication for the microfinance industry is that microfinance institutions need to pursue
technological progress in order to meet the dual objectives of reaching many poor people
and financial sustainability.
3. Concluding Remarks
Going forward, I anticipate extending my research on drawing stronger conclusions
about the underlying mechanisms through which airline alliances impact product quality.
On-time performance is one among other product quality dimensions such as mishandled
baggage, oversales, consumer complaints, in-flight amenities etc. Examining changes in
these other quality dimensions along with on-time performance may provide insights about
how alliance formations engage in overall quality differentiation in a strategic environment
where firms are competing with each other.
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JULES O. YIMGA Department of Economics, Kansas State University
On microfinance, the huge outcry against loan-based microfinance in the years 20102012 from the finding that loans which were safe during the boom had become risky propositions and the emergence of over-indebtedness problems in South Asia and elsewhere, the
Andhra Pradesh suicides, have all caused a shift towards prudential regulation e.g. savingsbased microfinance – My future plan is to investigate the effects of prudential regulation on
microfinance activities.
References
Berry, S., Levinsohn, J., and Pakes, A. (1995). Automobile prices in market equilibrium.
Econometrica: Journal of the Econometric Society, pages 841–890.
Berry, S. T. (1994). Estimating discrete-choice models of product differentiation. The
RAND Journal of Economics, pages 242–262.
McFadden, D. (1974). The measurement of urban travel demand. Journal of public
economics, 3(4):303–328.
Yimga, J. O. (2015). The Impact of High Microfinance Growth on Loan Portfolio. Journal
of International Development, forthcoming.