Taxes and Competition: Evidence from the airline industry

• 成果类型: Article
• 署名作者: Hanlon, Michelle; Shroff, Nemit; Yoon, Rachel
• 署名单位: Massachusetts Institute of Technology (MIT); Boston University
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101; 1879-1980
• DOI: 10.1016/j.jacceco.2026.101873
• 发表日期: 2026-08
• 页码: 101873
• 关键词: Financial constraints; market power; reform-act; DYNAMICS; predation; entry

摘要

This paper examines whether corporate tax cuts alter product-market competition by differentially affecting firms with high versus low tax burdens. Tax cuts increase after-tax cash flows for profitable firms but provide little immediate benefit to loss-making firms. We study the 1986 Tax Reform Act, which reduced the top corporate tax rate by 12 percentage points, and examine route-level price and quantity data from the U.S. airline industry. We find that in response to the Act, profitable airlines reduce ticket prices by 4.2% relative to their loss-making rivals and gain 3.3 percentage points in market share. These effects are concentrated in routes where loss-making competitors are financially constrained and are accompanied by increased entry by profitable airlines and exit by loss-making airlines. The evidence suggests that taxes can affect competitive outcomes, specifically in our paper by enabling high-tax firms to compete more aggressively with low-tax rivals after tax cuts.