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Liberalizing air cargo services in APEC

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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. Using the gravity model and employing the Air Liberalisation Index (ALI) developed by the WTO Secretariat, this paper finds 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. Considering the sector found to be most sensitive to the degree of aviation liberalisation, the estimates imply that a one point increase in the ALI is associated with an increase of 4% in bilateral parts and components trade, prior to taking account of general equilibrium effects. 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

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 17781.

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Date of creation: 07 Oct 2009
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Handle: RePEc:pra:mprapa:17781

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Related research

Keywords: Aviation; international trade in services; liberalization; international trade in goods; parts and components trade; production networks; APEC.;

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  1. Hummels, David, 2001. "Time as a Trade Barrier," GTAP Working Papers 1152, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  2. 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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  5. 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.
  6. 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.
  7. Inmaculada Martínez-Zarzoso, 2013. "The log of gravity revisited," Applied Economics, Taylor and Francis Journals, vol. 45(3), pages 311-327, January.
  8. S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
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Cited by:
  1. Borchert, Ingo & Gootiiz, Batshur & Grover, Arti & Mattoo, Aaditya, 2012. "Landlocked or policy locked ? how services trade protection deepens economic isolation," Policy Research Working Paper Series 5942, The World Bank.

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