This paper examines effects of the legal rules for property division at divorce on investment in human capital during marriage. We show that current rules generally lead to suboptimal levels of investment and spousal support or to inequitable distribution of the returns from such investment, or both. We propose a new rule that performs better than the existing rules on both efficiency and equity criteria and that requires no more information than the existing rules.

Airlines are insured against most direct costs of an accident, but they cannot insure against demand loss. Our estimation of deviations from expected demand following accidents finds little or no effect prior to airline deregulation and weak indication of a response to recent crashes. These results are consistent with the changes in an airline's equity value following an accident, which are statistically significant, but quite small relative to the total social cost of the accident.

US airlines have lost nearly $60 billion ($2009) in domestic markets since the 1978 deregulation, most of it in the last decade. The dismal financial record challenges the economics of deregulation. I examine some of the common explanations among industry participants and researchers—including high taxes and fuel costs, weak demand, and competition from lower-cost airlines. Major drivers seem to be the demand downturn after 9/11—demand remains much weaker today than in 2000—and the large cost differential between legacy and low-cost carriers, which has persisted even as the price differential between them has greatly declined.

EFFECTS OF NORTHWESTREPUBLIC AND TWAOZARK MERGERS ON FARES AT MINNEAPOLISST. PAUL AND ST. LOUIS

X-inefficiency is surely among the most important topics in microeconomics. Yet, economists have found it difficult to study. If a given level of X-inefficiency were inevitable and changeless, it would be of little interest (indeed, would not really deserve to be called X-inefficiency at all). So our attention should focus on actual and potential changes in X-inefficiency: that is, on causes of changes, internal to a firm, that shift the firm's cost function. We explore the use of firms ' “cost-cutting” announcements to study the causes of changes in X-inefficiency. Cost cutting announcements by large corporations are made frequently and are reported in the business press. One might be tempted to interpret these announcements as indicating efforts to reduce X-inefficiency, and indeed we

The current financial crisis in the commercial airline industry has engendered an active debate over appropriate governmental policies. Proponents of government support, instrumental in legislating a $5 billion cash transfer and $10 billion loan guarantee fund for U.S. carriers following September 11, 2001, point to the critical role that airlines play in the U.S. economy and the devastating effects airline failures could have on air service. Opponents argue that most airlines continue to operate through bankruptcy resolution and that even a complete shutdown of a major carrier, which rarely occurs, would stimulate expansion by other airlines to replace its abandoned flights. This debate highlights the need to understand the causal effect of airline financial distress on airline operations, distinct from correlations that may exist as a result of adverse demand or cost shocks that lead to both service declines and financial distress. We focus on airline Chapter 11 bankruptcy filings, an extreme measure of financial distress. We use data from 1984 through 2001 to evaluate the impact of major bankruptcies on the level of flights and destinations served at U.S. airports. Our results suggest that bankruptcy induces modest declines in service levels, particularly at midsize airports. This raises the question of whether such declines are socially inefficient. Restrictions imposed by the bankruptcy court judge or the creditors of an airline operating under Chapter 11 may affect total industry output or capacity offered if other carriers cannot rapidly replace the production of the constrained firm (i.e., if firms are not homogeneous and entry is not costless). With heterogeneous firms, one firm may be uniquely positioned to supply a flight, and its decision not to do so may lead to a reduction in total service. This is particularly likely in network industries, such as airlines, where there are strong production complementarities across routes. It is also possible, however, that pre-bankruptcy service levels were inefficiently high. The bankrupt carrier may have overprovided service, perhaps in an attempt to build market share, or flight-frequency competition among carriers may have led to excessive flights. In these cases, the flight reduction associated with bankruptcy may cause a movement toward the socially optimal level of service. Our work takes a first step toward resolving this issue, by determining the magnitude of bankruptcy effects on aggregate air service. The results suggest the need for further research to assess its possible welfare implications.

This paper examines effects of the legal rules for property division at divorce on investment in human capital during marriage. The authors show that current rules generally lead to suboptimal levels of investment and spousal support, or to inequitable distribution of the returns from such investment, or both. They propose a new rule that performs better than the existing rules on both efficiency and equity criteria and that requires no more information than the existing rules.