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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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References

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  1. Ximena Clark & David Dollar & Alejandro Micco, 2004. "Port Efficiency, Maritime Transport Costs and Bilateral Trade," NBER Working Papers 10353, National Bureau of Economic Research, Inc.
  2. Glick, Reuven & Rose, Andrew K, 2001. "Does a Currency Union Affect Trade? The Time Series Evidence," CEPR Discussion Papers 2891, C.E.P.R. Discussion Papers.
  3. Deardorff, Alan V., 1984. "Testing trade theories and predicting trade flows," Handbook of International Economics, 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, vol. 16(1), pages 81-108, June.
  5. Alejandro Micco & Ernesto H. Stein & Guillermo Luis Ordoñez, 2003. "The Currency Union Effect on Trade: Early Evidence from EMU," Research Department Publications 4339, Inter-American Development Bank, Research Department.
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Cited by:
  1. Zhang, Yahua & Findlay, Christopher, 2014. "Air transport policy and its impacts on passenger traffic and tourist flows," Journal of Air Transport Management, Elsevier, vol. 34(C), pages 42-48.
  2. Richard Baldwin & James Harrigan, 2011. "Zeros, Quality, and Space: Trade Theory and Trade Evidence," American Economic Journal: Microeconomics, American Economic Association, vol. 3(2), pages 60-88, May.
  3. Blyde, Juan & Molina, Danielken, 2013. "Logistics Infrastructure and the International Location of Fragmented Production," MPRA Paper 45749, University Library of Munich, Germany.
  4. 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.
  5. 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.
  6. Grancay, Martin, 2009. "A Brief Genesis of the North Atlantic Air Transport," MPRA Paper 14095, University Library of Munich, Germany.
  7. Grancay, Martin, 2009. "Evaluating competitiveness of airports - Airport competitiveness index," MPRA Paper 16488, University Library of Munich, Germany.
  8. Lux, Matthias, 2011. "Defying Gravity: The Substitutability of Transportation in International Trade," MPRA Paper 36395, University Library of Munich, Germany, revised Feb 2012.
  9. Henry Vega, 2008. "Transportation Costs of Fresh Flowers: A Comparison across Major Exporting Countries," IDB Publications 48178, Inter-American Development Bank.
  10. 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.
  11. World Bank, 2010. "Logistics in Argentina : Analysis, Options and Strategies to Overcome Emerging Restrictions," World Bank Other Operational Studies 12553, The World Bank.
  12. Danielken Molina, 2008. "Bilateral Transport Cost, Infrastructure, Common Bilateral Ties and Political Stability," REVISTA DE ECONOMÍA DEL ROSARIO, UNIVERSIDAD DEL ROSARIO.
  13. Piermartini, Roberta & Rousova, Linda, 2009. "Free Sky and Clouds of Restrictions," Discussion Papers in Economics 10944, University of Munich, Department of Economics.
  14. David L. Hummels & Georg Schaur, 2009. "Hedging Price Volatility Using Fast Transport," NBER Working Papers 15154, National Bureau of Economic Research, Inc.
  15. repec:hal:wpaper:halshs-00586878 is not listed on IDEAS
  16. Henry Vega, 2008. "The Transportation Costs of Fresh Flowers: A Comparison between Ecuador and Major Exporting Countries," IDB Publications 9293, Inter-American Development Bank.
  17. Yilmazkuday, Demet & Yilmazkuday, Hakan, 2014. "The role of direct flights in trade costs," Globalization and Monetary Policy Institute Working Paper 179, Federal Reserve Bank of Dallas.

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