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Free Sky and Clouds of Restrictions

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  • Piermartini, Roberta
  • Rousova, Linda

Abstract

An increasing percentage of trade occurs via air. However, air services are excluded from the WTO Agreement and, as a result, the aviation market is regulated by a plethora of Air Services Agreements. In this paper, we investigate the extent of discrimination -in terms of access to international air services- generated by this system. In particular, using recently available information on Air Services Agreements for 184 countries, we estimate the impact of international air services liberalization on air passenger flows. We find that increasing the degree of liberalization has a positive and significant effect. For instance, the higher degree of air services liberalization among countries of the European Economic Area (EEA) is estimated to account for approximately 30 per cent higher intra-EEA passenger traffic compared with countries that signed Open Skies-type agreements. Our results are robust to the use of several measures of liberalization as well as alternative estimation techniques that address potential problems of endogeneity, heteroscedasticity and data inaccuracy.

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Bibliographic Info

Paper provided by University of Munich, Department of Economics in its series Discussion Papers in Economics with number 10944.

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Date of creation: 14 Jul 2009
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Handle: RePEc:lmu:muenec:10944

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Keywords: Air Services Agreements; Air services liberalization; Air passenger traffic; Regulatory quality.;

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  1. 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.
  2. Alejandro Micco & Tomás Serebrisky, 2008. "Competition Regimes and Air Transport Costs: The Effects of Open Skies Agreement," IDB Publications 46738, Inter-American Development Bank.
  3. Giuseppe Nicoletti & Stefano Scarpetta & Olivier Boylaud, 2000. "Summary Indicators of Product Market Regulation with an Extension to Employment Protection Legislation," OECD Economics Department Working Papers 226, OECD Publishing.
  4. Micco, Alejandro & Serebrisky, Tomas, 2006. "Competition regimes and air transport costs: The effects of open skies agreements," Journal of International Economics, Elsevier, vol. 70(1), pages 25-51, September.
  5. David Hummels, 2007. "Transportation Costs and International Trade in the Second Era of Globalization," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 131-154, Summer.
  6. Rauf Gönenç & Giuseppe Nicoletti, 2000. "Regulation, Market Structure and Performance in Air Passenger Transportation," OECD Economics Department Working Papers 254, OECD Publishing.
  7. S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
  8. J. M. C. Santos Silva & Silvana Tenreyro, 2006. "The Log of Gravity," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 641-658, November.
  9. Alejandro Micco & Tomás Serebrisky, 2008. "Competition Regimes and Air Transport Costs: The Effects of Open Skies Agreement," IDB Publications 49839, Inter-American Development Bank.
  10. James E. Rauch & Vitor Trindade, 1999. "Ethnic Chinese Networks in International Trade," NBER Working Papers 7189, National Bureau of Economic Research, Inc.
  11. Reynolds-Feighan, Aisling J., 2000. "Air transport," Open Access publications from University College Dublin urn:hdl:10197/121, University College Dublin.
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