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Infrastructure, Competition Regimes and Air Transport Costs: Cross Country Evidence

  • Alejandro Micco
  • Tomás Serebrisky

The 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 US implemented a series of Open Skies agreements, which have provided a unique opportunity to assess the effect on prices of a change in the competition regime. 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 15 percent. A similar improvement in the quality of regulation reduces air transport costs 14 percent. In addition, Open Skies agreements reduce air transport costs by 8 percent.

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Paper provided by Inter-American Development Bank in its series IDB Publications (Working Papers) with number 6823.

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Date of creation: Jul 2004
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Handle: RePEc:idb:brikps:6823
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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. Overman, Henry G & Redding, Stephen J. & Venables, Anthony J, 2001. "The Economic Geography of Trade Production and Income: A Survey of Empirics," CEPR Discussion Papers 2978, C.E.P.R. Discussion Papers.
  3. Fink, Carsten & Mattoo, Aaditya & Neagu, Ileana Cristina, 2001. "Trade in international maritime services : how much does policy matter?," Policy Research Working Paper Series 2522, The World Bank.
  4. Alejandro Micco & Ernesto Stein & Guillermo OrdoÒez, 2003. "The currency union effect on trade: early evidence from EMU," Economic Policy, CEPR;CES;MSH, vol. 18(37), pages 315-356, October.
  5. Stephen Redding & Anthony J. Venables, 2003. "Geography and Export Performance: External Market Access and Internal Supply Capacity," NBER Working Papers 9637, National Bureau of Economic Research, Inc.
  6. 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.
  7. Mary R. Brooks & Kenneth Button & Peter Nijkamp (ed.), 2002. "Maritime Transport," Books, Edward Elgar, number 2268.
  8. Dollar, David & Micco, Alejandro & Clark, Ximena, 2002. "Maritime transport costs and port efficiency," Policy Research Working Paper Series 2781, The World Bank.
  9. Robert C. Feenstra, 1996. "U.S. Imports, 1972-1994: Data and Concordances," NBER Working Papers 5515, National Bureau of Economic Research, Inc.
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