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Is the regulation of the transport sector always detrimental to consumers?

  • Behrens, Kristian

    (CORE, Universite catholique de Louvain)

  • Carl Gaigne

    (IRNA-ESR, Renne, France)

  • Jacques-Francois Thisse

    (CORE, Universite catholique de Louvain)

The aim of this paper is to qualify the claim that regulating a competitive transport sector is always detrimental to consumers. We show indeed that, although transport deregulation is beneficial to consumers as long as the location of economic activity is fixed, this is no longer true when, in the long run, firms and workers are freely mobile. The reason is that the static gains due to less monopoly power in the transport sector may well map into dynamic dead-weight losses because deregulation of the transport sector leads to more inefficient agglomeration. This latter change may, quite surprisingly, increase consumer prices in some regions, despite a more competitive transport sector. Transport deregulation is shown to map into aggregate consumer welfare losses and more inequality among consumers in the long run.

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Paper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-455.

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Length: 34 pages
Date of creation: Dec 2006
Date of revision:
Handle: RePEc:tky:fseres:2006cf455
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  1. OTTAVIANO, Gianmarco & THISSE, Jacques-François, 2003. "Agglomeration and economic geography," CORE Discussion Papers 2003016, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Bailey, Elizabeth E, 1986. "Price and Productivity Change Following Deregulation: The U.S. Experience," Economic Journal, Royal Economic Society, vol. 96(381), pages 1-17, March.
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  4. Ottaviano, Gianmarco & Thisse, Jacques-François, 1999. "Integration, Agglomeration and the Political Economics of Factor Mobility," CEPR Discussion Papers 2185, C.E.P.R. Discussion Papers.
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  8. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
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  12. Richard C. Levin, 1981. "Railroad Rates, Profitability, and Welfare Under Deregulation," Bell Journal of Economics, The RAND Corporation, vol. 12(1), pages 1-26, Spring.
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  18. Ying, John S, 1990. "The Inefficiency of Regulating a Competitive Industry: Productivity Gains in Trucking Following Reform," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 191-201, May.
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  25. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476, June.
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