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Allocative Distortions, Technical Progress, and Input Demand in U.S. Airlines: 1970-1984

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  • Kumbhakar, Subal C

Abstract

This paper generalizes a globally concave and flexible cost function to accommodate allocative distortions. These distortions are introduced through shadow prices and are specified as functions of regressors that make distortion factors firm, input, and time specific. The estimated model, based on a panel of nineteen U.S. airlines observed during 1970-84, rejects the hypothesis of no allocative distortions. Increase in costs due to allocative distortions are calculated for each airline over the entire period. The rate of technical progress and economies of scale are also estimated based on models with and without allocative distortions. Copyright 1992 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Kumbhakar, Subal C, 1992. "Allocative Distortions, Technical Progress, and Input Demand in U.S. Airlines: 1970-1984," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(3), pages 723-737, August.
    • Handle: RePEc:ier:iecrev:v:33:y:1992:i:3:p:723-37
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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. Zarnikau, J. & Landreth, G. & Hallett, I. & Kumbhakar, S.C., 2007. "Industrial customer response to wholesale prices in the restructured Texas electricity market," Energy, Elsevier, vol. 32(9), pages 1715-1723.
    3. Obeng, K. & Sakano, R., 2020. "Effects of government regulations and input subsidies on cost efficiency: A decomposition approach," Transport Policy, Elsevier, vol. 91(C), pages 95-107.
    4. Kazuo Ogawa, 2011. "Why Are Concavity Conditions Not Satisfied in the Cost Function? The Case of Japanese Manufacturing Firms during the Bubble Period," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 73(4), pages 556-580, August.
    5. Johnston, Ahren & Ozment, John, 2013. "Economies of scale in the US airline industry," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 51(C), pages 95-108.
    6. Subal kumbhakar & Ana Lozano-Vivas, 2005. "Deregulation and Productivity: The Case of Spanish Banks," Journal of Regulatory Economics, Springer, vol. 27(3), pages 331-351, January.
    7. Shabbir Ahmad & Abid A. Burki, 2016. "Banking deregulation and allocative efficiency in Pakistan," Applied Economics, Taylor & Francis Journals, vol. 48(13), pages 1182-1196, March.
    8. Rich, Daniel P., 2004. "6. Productivity, Technical Change And Labor Relations In Transportation Industries," Research in Transportation Economics, Elsevier, vol. 10(1), pages 109-135, January.
    9. Di­az-Hernández, Juan José & Marti­nez-Budri­a, Eduardo & Jara-Di­az, Sergio, 2008. "The effects of ignoring inefficiency in the analysis of production: The case of cargo handling in Spanish ports," Transportation Research Part A: Policy and Practice, Elsevier, vol. 42(2), pages 321-329, February.

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