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Profitability and Product Quality: Economic Determinants of Airline Safety Performance

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  • Rose, Nancy L

Abstract

This study investigates product safety choices in the airline industry, with particular attention to the role of financial conditions. The analysis uses data on thirty-five large scheduled passenger airlines over the 1957-86 period to estimate the effect of profitability and other aspects of financial health on accident and incident rates. The results indicate that lower profitability is correlated with higher accident and incident rates, particularly for smaller carriers. These findings support a broad class of theoretical models that suggest links between financial conditions and product quality, and may have significant implications for the allocation of safety inspection and enforcement resources. Copyright 1990 by University of Chicago Press.

Suggested Citation

  • Rose, Nancy L, 1990. "Profitability and Product Quality: Economic Determinants of Airline Safety Performance," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 944-964, October.
  • Handle: RePEc:ucp:jpolec:v:98:y:1990:i:5:p:944-64
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    References listed on IDEAS

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    1. Kooreman, Peter & Kapteyn, Arie, 1987. "A Disaggregated Analysis of the Allocation of Time within the Household," Journal of Political Economy, University of Chicago Press, vol. 95(2), pages 223-249, April.
    2. Murphy, Kevin M & Topel, Robert H, 1985. "Estimation and Inference in Two-Step Econometric Models," Journal of Business & Economic Statistics, American Statistical Association, pages 370-379.
    3. Stafford, Frank & Duncan, Greg J., 1979. "The Use of Time and Technology by Households in the United States," Working Paper Series 21, Research Institute of Industrial Economics.
    4. Murphy, Kevin M & Topel, Robert H, 2002. "Estimation and Inference in Two-Step Econometric Models," Journal of Business & Economic Statistics, American Statistical Association, pages 88-97.
    5. Michael Abbott & Orley Ashenfelter, 1974. "Labor Supply, Commodity Demand, and the Allocation of Time," Working Papers 437, Princeton University, Department of Economics, Industrial Relations Section..
    6. Michael Abbott & Orley Ashenfelter, 1976. "Labour Supply, Commodity Demand and the Allocation of Time," Review of Economic Studies, Oxford University Press, vol. 43(3), pages 389-411.
    7. James J. Heckman & Thomas E. Macurdy, 1980. "A Life Cycle Model of Female Labour Supply," Review of Economic Studies, Oxford University Press, vol. 47(1), pages 47-74.
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