Infrastructure, competition regimes, and air transport costs: cross-country evidence
AbstractThe relevance of transport costs has increased as liberalization continues to reduce artificial barriers to trade. Countries need to adopt policies to get closer to global markets. Can improvements in infrastructure and regulation reduce transport costs? Is it worthwhile to implement policies designed to increase competition in transport markets? Focusing on air transport, which has increased its share in US imports from 24 percent in 1990 to 35 percent in 2000, this paper quantifies the effects of infrastructure, regulatory quality and liberalization of air cargo markets on transport costs. During the 1990s, 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. We find that infrastructure, quality of regulation and competition matter. In our sample, an improvement in airport infrastructure from the 25th to 75th percentiles reduces air transport costs by 15 percent. A similar improvement in the quality of regulation reduces air transport costs by 14 percent. Open Skies Agreements further reduce air transport costs by 8 percent.
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Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 3355.
Date of creation: 01 Jul 2004
Date of revision:
Transport Economics Policy&Planning; Transport and Trade Logistics; Economic Theory&Research; Decentralization; Common Carriers Industry; Airports and Air Services; Common Carriers Industry; Transport and Trade Logistics; Economic Theory&Research; Transport Economics Policy&Planning;
Other versions of this item:
- Alejandro Micco & TomÃ¡s Serebrisky, 2004. "Infrastructure, Competition Regimes and Air Transport Costs: Cross Country Evidence," Econometric Society 2004 Latin American Meetings 117, Econometric Society.
- Alejandro Micco & Tomas Serebrisky, 2004. "Infrastructure, Competition Regimes and Air Transport Costs: Cross Country Evidence," Research Department Publications 4369, Inter-American Development Bank, Research Department.
- F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
- L4 - Industrial Organization - - Antitrust Issues and Policies
- L9 - Industrial Organization - - Industry Studies: Transportation and Utilities
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