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Aviation Policy: Past and Present

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  • Elizabeth E. Bailey

Abstract

Airline deregulation has been a symbol of the trend toward less expansive government over the past quarter century. The move from economic regulation to deregulation has delivered on its efficiency promises. There have been significant benefits to consumers in terms of lower prices and more convenient schedules. However, airline competition, particularly at hub airports, remains imperfect. The nature of these imperfections is explained better by models of oligopolistic behavior than by the contestability theory. Paradoxically for this industry, the terrorist attack of September 11, 2001, has ushered in an expanded role of government in aviation policy. This expanded role does not reinstate government intervention in airline economic decisions. Rather, it provides financial stabilization (bailout and loan guarantees) of the industry in the short run and long‐term structural change in aviation security.

Suggested Citation

  • Elizabeth E. Bailey, 2002. "Aviation Policy: Past and Present," Southern Economic Journal, John Wiley & Sons, vol. 69(1), pages 12-20, July.
    • Handle: RePEc:wly:soecon:v:69:y:2002:i:1:p:12-20
    DOI: 10.1002/j.2325-8012.2002.tb00475.x
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    References listed on IDEAS

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    1. Clifford Winston, 1998. "U.S. Industry Adjustment to Economic Deregulation," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 89-110, Summer.
    2. Baumol, William J, 1982. "Contestable Markets: An Uprising in the Theory of Industry Structure," American Economic Review, American Economic Association, vol. 72(1), pages 1-15, March.
    3. Kim, E Han & Singal, Vijay, 1993. "Mergers and Market Power: Evidence from the Airline Industry," American Economic Review, American Economic Association, vol. 83(3), pages 549-569, June.
    4. Elizabeth E. Bailey & Dong Liu, 1995. "Airline Consolidation and Consumer Welfare," Eastern Economic Journal, Eastern Economic Association, vol. 21(4), pages 463-476, Fall.
    5. Christopher Mayer & Todd Sinai, "undated". "Network Effects, Congestion Externalities, and Air Traffic Delays: Or Why All Delays Are Not Evil," Zell/Lurie Center Working Papers 393, Wharton School Samuel Zell and Robert Lurie Real Estate Center, University of Pennsylvania.
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    7. Steven A. Morrison & Clifford Winston, 1989. "Enhancing the Performance of the Deregulated Air Transportation System," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1989 Micr), pages 61-123.
    8. Bailey, Elizabeth E & Williams, Jeffrey R, 1988. "Sources of Economic Rent in the Deregulated Airline Industry," Journal of Law and Economics, University of Chicago Press, vol. 31(1), pages 173-202, April.
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    Cited by:

    1. Jeffrey P. Cohen & Cletus C. Coughlin, 2003. "Congestion at airports: the economics of airport expansions," Review, Federal Reserve Bank of St. Louis, vol. 85(May), pages 9-26.
    2. Thorsten Fischer & David R. Kamerschen, 2003. "Measuring Competition in the U.S. Airline Industry Using the Rosse-Panzar Test and Cross-Sectional Regression Analyses," Journal of Applied Economics, Universidad del CEMA, vol. 6, pages 73-93, May.

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