IDEAS home Printed from https://ideas.repec.org/a/eee/retrec/v45y2014icp9-17.html
   My bibliography  Save this article

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

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0739885914000237
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.retrec.2014.07.002?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Lau, Lawrence J & Yotopoulos, Pan A, 1971. "A Test for Relative Efficiency and Application to Indian Agriculture," American Economic Review, American Economic Association, vol. 61(1), pages 94-109, March.
    2. Tsoukalas, Gerassimos & Belobaba, Peter & Swelbar, William, 2008. "Cost convergence in the US airline industry: An analysis of unit costs 1995–2006," Journal of Air Transport Management, Elsevier, vol. 14(4), pages 179-187.
    3. Ng, Charles K & Seabright, Paul, 2001. "Competition, Privatisation and Productive Efficiency: Evidence from the Airline Industry," Economic Journal, Royal Economic Society, vol. 111(473), pages 591-619, July.
    4. Oum, Tae Hoon & Zhang, Yimin, 1995. "Competition and Allocative Efficiency: The Case of the U.S. Telephone Industry," The Review of Economics and Statistics, MIT Press, vol. 77(1), pages 82-96, February.
    5. Atkinson, Scott E & Halvorsen, Robert, 1984. "Parametric Efficiency Tests, Economies of Scale, and Input Demand in U.S. Electric Power Generation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(3), pages 647-662, October.
    6. Glenn W. Graves & Richard D. McBride & Ira Gershkoff & Diane Anderson & Deepa Mahidhara, 1993. "Flight Crew Scheduling," Management Science, INFORMS, vol. 39(6), pages 736-745, June.
    7. Baltagi, Badi H & Griffin, James M & Rich, Daniel P, 1995. "Airline Deregulation: The Cost Pieces of the Puzzle," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(1), pages 245-260, February.
    8. Silke Januszewski Forbes & Mara Lederman, 2009. "Adaptation and Vertical Integration in the Airline Industry," American Economic Review, American Economic Association, vol. 99(5), pages 1831-1849, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    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. 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).
    5. 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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Efthymios G. Tsionas & Dimitris K. Christopoulos, 2004. "Inflation, Shadow Prices and the EMU: Evidence From Greece," Bulletin of Economic Research, Wiley Blackwell, vol. 56(3), pages 251-269, July.
    2. Burki, Abid A. & Khan, Mahmood-ul-Hasan, 2004. "Effects of allocative inefficiency on resource allocation and energy substitution in Pakistan's manufacturing," Energy Economics, Elsevier, vol. 26(3), pages 371-388, May.
    3. 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.
    4. Tschirhart, John, 1995. "Monopsony power and the existence of natural monopoly in energy utilities," Resource and Energy Economics, Elsevier, vol. 17(4), pages 327-340, December.
    5. Díaz-Hernández, Juan José & Martínez-Budría, Eduardo & González, Rosa Marina, 2020. "Effects of Inefficiency on Marginal Costs, Degree of Economies of Scale and Technical Change: A Theoretical Relationship. The Case of Spanish Port Authorities || Efectos de la ineficiencia sobre los c," Revista de Métodos Cuantitativos para la Economía y la Empresa = Journal of Quantitative Methods for Economics and Business Administration, Universidad Pablo de Olavide, Department of Quantitative Methods for Economics and Business Administration, vol. 29(1), pages 190-207, June.
    6. Shenggen Fan, 2000. "Technological change, technical and allocative efficiency in Chinese agriculture: the case of rice production in Jiangsu," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(1), pages 1-12.
    7. Rolf Färe & Daniel Primont, 2012. "Dual allocative efficiency parameters," Journal of Productivity Analysis, Springer, vol. 37(3), pages 233-238, June.
    8. Sohail Zafar & Eatzaz Ahmed, 2005. "Evidence on Allocative Efficiency and Elasticities of Substitution in the Manufacturing Sector of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 44(4), pages 795-803.
    9. Zuidberg, Joost, 2014. "Identifying airline cost economies: An econometric analysis of the factors affecting aircraft operating costs," Journal of Air Transport Management, Elsevier, vol. 40(C), pages 86-95.
    10. Ouyang, Xiaoling & Sun, Chuanwang, 2015. "Energy savings potential in China's industrial sector: From the perspectives of factor price distortion and allocative inefficiency," Energy Economics, Elsevier, vol. 48(C), pages 117-126.
    11. Bourjade, Sylvain & Muller-Vibes, Catherine, 2023. "Optimal leasing and airlines' cost efficiency: A stochastic frontier analysis," Transportation Research Part A: Policy and Practice, Elsevier, vol. 176(C).
    12. Christopoulos, Dimitris K. & Tsionas, Efthymios G., 2002. "Allocative inefficiency and the capital-energy controversy," Energy Economics, Elsevier, vol. 24(4), pages 305-318, July.
    13. Oum, Tae Hoon & Yu, Chunyan, 1998. "Cost competitiveness of major airlines: an international comparison," Transportation Research Part A: Policy and Practice, Elsevier, vol. 32(6), pages 407-422, August.
    14. Zhang, Shangfeng & Chen, Congcong & Huang, Duen-Huang & Hu, Lang, 2022. "Measurement of factor price distortion: A new production function method with time-varying elasticity," Technological Forecasting and Social Change, Elsevier, vol. 175(C).
    15. Balint, Borbala & Sauer, Johannes, 2006. "Distorted Prices And Producer Efficiency - Romanian Maize," 46th Annual Conference, Giessen, Germany, October 4-6, 2006 14958, German Association of Agricultural Economists (GEWISOLA).
    16. Al-Hadi, Azrina Abdullah & Bitzan, John & Peoples, James, 2019. "Input allocation efficiency in the United States railroad industry: Changing work rules and managerial flexibility," Transportation Research Part A: Policy and Practice, Elsevier, vol. 126(C), pages 281-296.
    17. Balint, B. & Sauer, J., 2007. "Distorted Prices and Producer Efficiency – Romanian Maize," Proceedings “Schriften der Gesellschaft für Wirtschafts- und Sozialwissenschaften des Landbaues e.V.”, German Association of Agricultural Economists (GEWISOLA), vol. 42, March.
    18. Kristin Roll, 2013. "Measuring performance, development and growth when restricting flexibility," Journal of Productivity Analysis, Springer, vol. 39(1), pages 15-25, February.
    19. Singh, Jagroop & Sharma, Somesh Kumar & Srivastava, Rajnish, 2019. "What drives Indian Airlines operational expense: An econometric model," Journal of Air Transport Management, Elsevier, vol. 77(C), pages 32-38.
    20. Tai-Hsin Huang, 2000. "Estimating X-Efficiency in Taiwanese Banking Using a Translog Shadow Profit Function," Journal of Productivity Analysis, Springer, vol. 14(3), pages 225-245, November.

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:retrec:v:45:y:2014:i:c:p:9-17. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/620614/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.