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Cost–Benefit Analysis of Transport Policies: An Application to Subsidies in Air Transport Markets

In: Economic Evaluation of Transport Projects

Author

Listed:
  • Ginés de Rus

    (University of Las Palmas de Gran Canaria
    University Carlos III of Madrid
    FEDEA)

  • M. Pilar Socorro

    (University of Las Palmas de Gran Canaria)

  • Jorge Valido

    (University of Las Palmas de Gran Canaria)

  • Javier Campos

    (University of Las Palmas de Gran Canaria)

Abstract

In this chapter, we use the cost-benefit analysis (CBA) to evaluate subsidies in transport markets. The CBA of any public intervention requires the comparison of the situations with and without intervention, identifying winners and losers, and carefully analysing the key parameters that would allow the public policy to induce the desired effects in the market. In particular, we focus on subsidies for resident passengers in air transport markets. We prove that the effectiveness of the subsidy strongly depends on the particular characteristics of the route, such as the level of competition, the proportion of residents, or the shape of residents’ and non-residents’ demand functions. Thus, any evaluation of the effects of such subsidies has to be performed route by route, taking into account the particular characteristics of the route, the market share of residents and non-residents, and the degree of competition.

Suggested Citation

  • Ginés de Rus & M. Pilar Socorro & Jorge Valido & Javier Campos, 2023. "Cost–Benefit Analysis of Transport Policies: An Application to Subsidies in Air Transport Markets," Springer Books, in: Economic Evaluation of Transport Projects, chapter 0, pages 83-112, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-35959-0_5
    DOI: 10.1007/978-3-031-35959-0_5
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