Infrastructure, competition regimes, and air transport costs: cross-country evidence

By: Contributor(s): Material type: TextTextSeries: Policy Research Working Paper, no. 3355Publication details: Washington, D. C. The World Bank 2004Description: 36 pSubject(s): DDC classification:
  • 387.70973 M4I6
Summary: 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 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. http://documents.worldbank.org/curated/en/146021468778204359/Infrastructure-competition-regimes-and-air-transport-costs-cross-country-evidence
List(s) this item appears in: Aviation & Air transportation
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Books Vikram Sarabhai Library Rack 27-B / Slot 1304 (0 Floor, East Wing) General Stacks 387.70973 M4I6 (Browse shelf(Opens below)) Available 161990

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 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.

http://documents.worldbank.org/curated/en/146021468778204359/Infrastructure-competition-regimes-and-air-transport-costs-cross-country-evidence

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