AIRLINE DEREGULATION - THE COST PIECES OF THE PUZZLE

This paper analyzes cost changes in the U.S. airline industry in the p re- and post-deregulation era using a panel data set of airlines. Spec ifically, it seeks to disentangle cost changes attributable to technic al change, economies of scale and density, and input prices. We estima te a purely general index of industry technical change and in turn ana lyze its determinants. Despite the slowing of productivity growth in t he 1980s, deregulation does appear to have stimulated technical change due to more efficient route structures.