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Leasing and secondary markets: theory and evidence from commercial aircraft

Gavazza, Alessandro (2011) Leasing and secondary markets: theory and evidence from commercial aircraft. Journal of Political Economy, 119 (2). pp. 325-377. ISSN 0022-3808

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Identification Number: 10.1086/660730


I develop a model of costly capital reallocation to understand how leasing reduces trading frictions. Leased assets trade more frequently and produce more output than owned assets because (1) high-volatility firms are more likely to lease than low-volatility firms and (2) firms shed leased asssets faster than owned assets amid productivity shocks because of lower transaction costs. Commercial aircraft data show that leased aircraft have holding durations 38 percent shorter and fly 6.5 percent more hours than owned aircraft. These differences arise primarily because when profitability declines, carriers keep owned aircraft and return leased aircraft, which lessors redeploy to more productive operators.

Item Type: Article
Official URL:
Additional Information: © 2011 The University of Chicago.
Divisions: Economics
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HF Commerce
Date Deposited: 18 Feb 2014 16:14
Last Modified: 20 Aug 2021 00:51

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