Competition, cost structure, and labour leverage : evidence from the U.S. airline industry / Konstantin Wagner
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Competition, cost structure, and labour leverage
Discovery
1738248399
URN
urn:nbn:de:gbv:3:2-127919
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Publication history
Halle (Saale), Germany : Halle Institute for Economic Research (IWH) - Member of the Leibniz Association, [09. November 2020]
Content
1 Online-Ressource (III, 47 Seiten, 2,51 MB) : Illustrationen
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Language
eng
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Abstract
I study the effect of increasing competition on financial performance through labour leverage. To capture competition, I exploit variation in product market contestability in the U.S. airline industry. First, I find that increasing competitive pressure leads to increasing labour leverage, proxied by labour share. This explains the decrease in operating profitability through labour rigidities. Second, by exploiting variation in human capital specificity, I show that contestability of product markets induces labour market contestability. Whereas affected firms might experience more stress through higher wages or loss of skilled human capital, more mobile employee groups benefit from competitions through higher labour shares.
Series
IWH-Diskussionspapiere ; 2020, no. 21 (November 2020) ppn:837399270