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U.S. air carriers and work-rule constraints – Do airlines employ an allocatively efficient mix of inputs?

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  • Bitzan, John
  • Peoples, James

Abstract

Past research on the allocation of factor inputs for the airline industry suggests an overutilization of labor relative to other inputs immediately following deregulation. This study argues rigid work rules in conjunction with productivity improvements of nonlabor inputs may create an incentive for carriers to under-invest in labor relative to nonlabor inputs. Findings derived from estimating a long-run shadow cost function for this industry suggest that airlines over-employ non-labor inputs relative to labor. Simulations suggest potential savings ranging from 13 to 14 percent derived from satisfying the conditions of allocative efficiency for carriers in the study's sample.

Suggested Citation

  • Bitzan, John & Peoples, James, 2014. "U.S. air carriers and work-rule constraints – Do airlines employ an allocatively efficient mix of inputs?," Research in Transportation Economics, Elsevier, vol. 45(C), pages 9-17.
    • Handle: RePEc:eee:retrec:v:45:y:2014:i:c:p:9-17
    DOI: 10.1016/j.retrec.2014.07.002
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    References listed on IDEAS

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    Cited by:

    1. Scotti, Davide & Volta, Nicola, 2017. "Profitability change in the global airline industry," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 102(C), pages 1-12.
    2. Ndembe, Elvis & Bitzan, John D., 2022. "A shadow price approach examining service quality in a heavily captive U.S. freight transportation market: The case of grain transport," Transport Policy, Elsevier, vol. 116(C), pages 1-10.
    3. Reynolds-Feighan, Aisling, 2018. "US feeder airlines: Industry structure, networks and performance," Transportation Research Part A: Policy and Practice, Elsevier, vol. 117(C), pages 142-157.
    4. Nguyen, Minh-Anh Thi & Yu, Ming-Miin & Lirn, Taih-Cherng, 2022. "Revenue efficiency across airline business models: A bootstrap non-convex meta-frontier approach," Transport Policy, Elsevier, vol. 117(C), pages 108-117.
    5. Liu, Wei & Gao, Lixiang & Song, Hang & Huang, Mingdong, 2021. "Factor market distortion, technology change, and green growth in the Chinese civil airline industry," Journal of Asian Economics, Elsevier, vol. 77(C).

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    More about this item

    Keywords

    Allocative efficiency; Airline work rules; Translog cost function;
    All these keywords.

    JEL classification:

    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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