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Air cargo transport in APEC: Regulation and effects on merchandise trade

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  • Geloso Grosso, Massimo
  • Shepherd, Ben

Abstract

This study aims at assessing the link between a more liberal air cargo regime and increased bilateral merchandise trade in the Asia Pacific region, under the auspices of APEC. Results from a gravity model using the Air Liberalisation Index (ALI) developed by the WTO Secretariat provide strong support for two hypotheses. First, more liberal air services policies are positively, significantly and robustly associated with higher bilateral trade in merchandise. The results also show that air transport policy matters more for some sectors than for others. A particularly strong relationship is found between bilateral liberalisation and trade in manufactured goods, time sensitive products, and parts and components. Prior to taking account of general equilibrium effects, the estimates imply that a one point increase in the ALI is associated with an increase of 4% in bilateral parts and components trade, which is the sector found to be most sensitive to the degree of aviation liberalisation. These findings have important policy implications. In particular, economies actively seeking greater integration in international production networks could greatly benefit from a more liberal aviation policy regime.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Asian Economics.

Volume (Year): 22 (2011)
Issue (Month): 3 (June)
Pages: 203-212

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Handle: RePEc:eee:asieco:v:22:y:2011:i:3:p:203-212

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Web page: http://www.elsevier.com/locate/asieco

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Keywords: Asia-Pacific Trade policy Air transport;

References

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  1. Mitsuyo Ando & Fukunari Kimura, 2005. "The Formation of International Production and Distribution Networks in East Asia," NBER Chapters, in: International Trade in East Asia, NBER-East Asia Seminar on Economics, Volume 14, pages 177-216 National Bureau of Economic Research, Inc.
  2. Joao Santos Silva & Silvana Tenreyro, 2005. "The Log of Gravity," CEP Discussion Papers dp0701, Centre for Economic Performance, LSE.
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  4. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2007. "Estimating Trade Flows: Trading Partners and Trading Volumes," NBER Working Papers 12927, National Bureau of Economic Research, Inc.
  5. James E. Anderson & Eric van Wincoop, 2001. "Gravity with Gravitas: A Solution to the Border Puzzle," NBER Working Papers 8079, National Bureau of Economic Research, Inc.
  6. Hummels, David, 2001. "Time as a Trade Barrier," GTAP Working Papers 1152, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  7. Alejandro Micco & Tomás Serebrisky, 2004. "Infrastructure, Competition Regimes and Air Transport Costs: Cross Country Evidence," IDB Publications 6823, Inter-American Development Bank.
  8. Simeon Djankov & Caroline Freund & Cong S. Pham, 2010. "Trading on Time," The Review of Economics and Statistics, MIT Press, vol. 92(1), pages 166-173, February.
  9. John S. Wilson & Catherine L. Mann & Tsunehiro Otsuki, 2005. "Assessing the Benefits of Trade Facilitation: A Global Perspective," The World Economy, Wiley Blackwell, vol. 28(6), pages 841-871, 06.
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Citations

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Cited by:
  1. Arvis, Jean-François & Shepherd, Ben, 2011. "The air connectivity index : measuring integration in the global air transport network," Policy Research Working Paper Series 5722, The World Bank.
  2. Zhang, Yahua & Findlay, Christopher, 2014. "Air transport policy and its impacts on passenger traffic and tourist flows," Journal of Air Transport Management, Elsevier, Elsevier, vol. 34(C), pages 42-48.
  3. Murat Genç & David Law, 2014. "A Gravity Model of Barriers to Trade in New Zealand," Treasury Working Paper Series 14/05, New Zealand Treasury.
  4. Bianka Dettmer & Andreas Freytag & Peter Draper, 2013. "Check-in, departure and arrival times: Air cargo in Southern Africa?," Jena Economic Research Papers 2013-018, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.

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