Competition, privatisation and productive efficiency: Evidence from the airline industry

We use data from the airline industry to examine the extent to which the co sts of airline operations are affected by rents accruing to workers, and th e extent to which these rents depend inter alia upon the degree of competit ion in the industry. Our empirical results based on a panel of twelve Europ ean and seven major United States airlines confirm that state ownership sub stantially increases rents to tabour, while the effects of competition are more subtle and ambiguous; airline profits tend to be associated with highe r rents to employees. The gains from further privatisation and liberalisati on may be quite large.