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

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  • Alejandro Micco
  • Tomas Serebrisky

Abstract

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.

Suggested Citation

  • 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.
  • Handle: RePEc:idb:wpaper:4369
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    References listed on IDEAS

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    1. Alejandro Micco & Ernesto H. Stein & Guillermo Luis Ordoñez, 2003. "The Currency Union Effect on Trade: Early Evidence from EMU," Research Department Publications 4339, Inter-American Development Bank, Research Department.
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    Cited by:

    1. Dettmer, Bianka & Freytag, Andreas & Draper, Peter, 2014. "Air Cargo beyond Trade Barriers in Africa," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 29, pages 95-138.
    2. Bianka Dettmer & Andreas Freytag & Peter Draper, 2013. "Check-in, departure and arrival times: Air cargo in Southern Africa?," Jena Economic Research Papers 2013-018, Friedrich-Schiller-University Jena.
    3. Benjamin Bridgman, 2008. "Energy Prices and the Expansion of World Trade," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 904-916, October.
    4. Luisa Alamá Sabater & Laura Marquez Ramos & Celestino Suarez Burguet, 2011. "Regional Trade and Logistics Infrastructure: A Spatial Approach," ERSA conference papers ersa11p1737, European Regional Science Association.
    5. Geloso Grosso, Massimo & Shepherd, Ben, 2011. "Air cargo transport in APEC: Regulation and effects on merchandise trade," Journal of Asian Economics, Elsevier, vol. 22(3), pages 203-212, June.
    6. Christophe Gouel & Nina Kousnetzoff & Hassan Salman, 2008. "Commerce international et transports : tendances du passe et prospective 2020," Working Papers 2008-28, CEPII research center.
    7. Gordon Wilmsmeier & Inmaculada Martínez-Zarzoso, 2009. "Determinants of maritime transport costs -- a panel data analysis for Latin American trade," Transportation Planning and Technology, Taylor & Francis Journals, vol. 33(1), pages 105-121, October.
    8. Luisa Alamá-Sabater & Laura Márquez-Ramos & Celestino Suárez-Burguet & J. Miguel Navarro-Azorín, 2012. "Interregional Trade and Transport Connectivity. An Analysis of Spatial Dependence," Working Papers 2012/20, Economics Department, Universitat Jaume I, Castellón (Spain).
    9. World Bank, 2006. "Is There a New Vision for Maghreb Economic Integation? Volume 2. Annex," World Bank Other Operational Studies 19624, The World Bank.
    10. Ikumo Isono, 2011. "Economic Integration and the Expansion of Trade and Transport Networks," Chapters,in: The Economics of East Asian Integration, chapter 13 Edward Elgar Publishing.
    11. Laura Márquez-Ramos & Inmaculada Martínez-Zarzoso & Eva Pérez-García & Gordon Wilmsmeier, 2011. "“Special Issue on Latin-American Research” Maritime Networks, Services Structure and Maritime Trade," Networks and Spatial Economics, Springer, vol. 11(3), pages 555-576, September.
    12. Huang, Rocco R., 2007. "Distance and trade: Disentangling unfamiliarity effects and transport cost effects," European Economic Review, Elsevier, vol. 51(1), pages 161-181, January.
    13. Thomas Gries & Wim Naudé & Marianne Matthee, 2009. "The Optimal Distance To Port For Exporting Firms," Journal of Regional Science, Wiley Blackwell, vol. 49(3), pages 513-528.
    14. Bensassi, Sami & Márquez-Ramos, Laura & Martínez-Zarzoso, Inmaculada & Suárez-Burguet, Celestino, 2015. "Relationship between logistics infrastructure and trade: Evidence from Spanish regional exports," Transportation Research Part A: Policy and Practice, Elsevier, vol. 72(C), pages 47-61.

    More about this item

    JEL classification:

    • 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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