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Competition Regimes and Air Transport Costs: The Effects of Open Skies Agreement

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  • Alejandro Micco
  • Tomás Serebrisky

Abstract

The relevance of transport costs has increased as liberalization continues to reduce artificial barriers to trade. Is it worthwhile to implement policies designed to increase competition in transport markets? Focusing on air transport, this paper quantifies the effects of liberalization of air cargo markets on transport costs. Between 1990 and 2003, the United States implemented a series of Open Skies Agreements, providing a unique opportunity to assess the effect that a change in the competition regime has on prices. In our sample, Open Skies Agreements reduce air transport costs by 9% and increase by 7% the share of imports arriving by air. Those results hold for developed and upper-middle-income developing countries but for lower-middle-income and low-income developing countries Open Skies Agreements do not reduce. This paper was presented at the Fourth LAEBA Annual Meeting, held in Lima, Peru, on June 17, 2008.

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Bibliographic Info

Paper provided by Inter-American Development Bank in its series IDB Publications with number 46738.

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Date of creation: Jun 2008
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Handle: RePEc:idb:brikps:46738

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Keywords: Integration & Trade; Infrastructure & Transport; LAEBA; Transport costs; Air transport liberalization; Infrastructure; Trade; Regulatory quality; Open Skies Agreements;

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  1. Glick, Reuven & Rose, Andrew K, 2001. "Does a Currency Union Affect Trade? The Time Series Evidence," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2891, C.E.P.R. Discussion Papers.
  2. Clark, Ximena & Dollar, David & Micco, Alejandro, 2004. "Port efficiency, maritime transport costs, and bilateral trade," Journal of Development Economics, Elsevier, Elsevier, vol. 75(2), pages 417-450, December.
  3. Deardorff, Alan V., 1984. "Testing trade theories and predicting trade flows," Handbook of International Economics, Elsevier, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 10, pages 467-517 Elsevier.
  4. Carsten Fink & Aaditya Mattoo & Ileana Cristina Neagu, 2002. "Trade in International Maritime Services: How Much Does Policy Matter?," World Bank Economic Review, World Bank Group, World Bank Group, vol. 16(1), pages 81-108, June.
  5. Alejandro Micco & Ernesto Stein & Guillermo OrdoÃ’ez, 2003. "The currency union effect on trade: early evidence from EMU," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 18(37), pages 315-356, October.
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Cited by:
  1. Blyde, Juan & Molina, Danielken, 2013. "Logistics Infrastructure and the International Location of Fragmented Production," MPRA Paper 45749, University Library of Munich, Germany.
  2. Cristea, Anca & Hillberry, Russell & Mattoo, Aaditya, 2014. "Open skies over the Middle East," Policy Research Working Paper Series 6937, The World Bank.
  3. Richard Baldwin & James Harrigan, 2007. "Zeros, Quality and Space: Trade Theory and Trade Evidence," NBER Working Papers 13214, National Bureau of Economic Research, Inc.
  4. Grancay, Martin, 2009. "Evaluating competitiveness of airports - Airport competitiveness index," MPRA Paper 16488, University Library of Munich, Germany.
  5. 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.
  6. Mauricio Mesquita Moreira & Paolo Giordano & Antoni Estevadeordal & Tomás Serebrisky & Jordan Schwartz & Ricardo Sánchez & Aiga Stokenberga, 2010. "Nota de Discusión de Politícas: Cómo Reducir Las Brechas de Integración (Escenarios y Recomendaciones de Políticas para Promover la Infraestructura Física y Reducir los Costes del Comercio Intra," IDB Publications 9338, Inter-American Development Bank.
  7. Lux, Matthias, 2011. "Defying Gravity: The Substitutability of Transportation in International Trade," MPRA Paper 36395, University Library of Munich, Germany, revised Feb 2012.
  8. Piermartini, Roberta & Rousova, Linda, 2009. "Free Sky and Clouds of Restrictions," Discussion Papers in Economics, University of Munich, Department of Economics 10944, University of Munich, Department of Economics.
  9. Hummels, David L. & Schaur, Georg, 2010. "Hedging price volatility using fast transport," Journal of International Economics, Elsevier, Elsevier, vol. 82(1), pages 15-25, September.
  10. Henry Vega, 2008. "The Transportation Costs of Fresh Flowers: A Comparison between Ecuador and Major Exporting Countries," IDB Publications 9293, Inter-American Development Bank.
  11. Clifford Winston, 2013. "On the Performance of the U.S. Transportation System: Caution Ahead," Journal of Economic Literature, American Economic Association, vol. 51(3), pages 773-824, September.
  12. Danielken Molina, 2009. "Elasticity of Substitution in the U.S. Market with Endogenous Transport Costs: a Sectoral Approach," REVISTA DE ECONOMÍA DEL ROSARIO, UNIVERSIDAD DEL ROSARIO.
  13. Henry Vega, 2008. "Transportation Costs of Fresh Flowers: A Comparison across Major Exporting Countries," IDB Publications 48178, Inter-American Development Bank.
  14. World Bank, 2013. "Republic of Armenia : Accumulation, Competition, and Connectivity," World Bank Other Operational Studies 16781, The World Bank.
  15. Danielken Molina, 2008. "Bilateral Transport Cost, Infrastructure, Common Bilateral Ties and Political Stability," REVISTA DE ECONOMÍA DEL ROSARIO, UNIVERSIDAD DEL ROSARIO.
  16. Yilmazkuday, Demet & Yilmazkuday, Hakan, 2014. "The role of direct flights in trade costs," Globalization and Monetary Policy Institute Working Paper, Federal Reserve Bank of Dallas 179, Federal Reserve Bank of Dallas.
  17. Grancay, Martin, 2009. "A Brief Genesis of the North Atlantic Air Transport," MPRA Paper 14095, University Library of Munich, Germany.
  18. World Bank, 2010. "Logistics in Argentina : Analysis, Options and Strategies to Overcome Emerging Restrictions," World Bank Other Operational Studies 12553, The World Bank.
  19. World Bank, 2009. "The Service Revolution in South Asia," World Bank Other Operational Studies 19332, The World Bank.
  20. repec:hal:wpaper:halshs-00586878 is not listed on IDEAS

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