Airline horizontal mergers and productivity: Empirical evidence from a quasi-natural experiment in China

The identification of possible efficiency gains is a core issue in the analysis of mergers. However, empirical studies are generally subject to bias caused by merger endogeneity. In the early 2000s, the Chinese government pursued a strategy of merging small firms in key industries to create large enterprise groups. Mergers created by this policy provide a rare quasi-natural experiment to investigate the effect of mergers. We take the opportunity to apply the difference-in-differences approach to identify the effect of mergers on the efficiency of Chinese airlines. Overall, our analysis suggests that the mergers increased the productivity of Chinese airlines. (c) 2018 Elsevier B.V. All rights reserved.