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Competition Regimes and Air Transport Costs: The Effects of Open Skies Agreement

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  • Micco, Alejandro
  • Serebrisky, Tomás

Abstract

The relevance of transport costs has increased as liberalization continues to reduce artificial barriers to trade. Is it worthwhile to implement policies designed to increase competition in transport markets? Focusing on air transport, this paper quantifies the effects of liberalization of air cargo markets on transport costs. Between 1990 and 2003, 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. In our sample, Open Skies Agreements reduce air transport costs by 9% and increase by 7% the share of imports arriving by air. Those results hold for developed and upper-middle-income developing countries but for lower-middle-income and low-income developing countries Open Skies Agreements do not reduce. This paper was presented at the Fourth LAEBA Annual Meeting, held in Lima, Peru, on June 17, 2008.

Suggested Citation

  • Micco, Alejandro & Serebrisky, Tomás, 2008. "Competition Regimes and Air Transport Costs: The Effects of Open Skies Agreement," IDB Publications (Working Papers) 3688, Inter-American Development Bank.
    • Handle: RePEc:idb:brikps:3688
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    References listed on IDEAS

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    1. Alejandro Micco & Ernesto Stein & Guillermo Ordoñez, 2003. "The currency union effect on trade: early evidence from EMU [‘A theoretical foundation for the gravity equation’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 18(37), pages 315-356.
    2. Glick, Reuven & Rose, Andrew K., 2002. "Does a currency union affect trade? The time-series evidence," European Economic Review, Elsevier, vol. 46(6), pages 1125-1151, June.
    3. World Bank, 2005. "World Development Indicators 2005," World Bank Publications - Books, The World Bank Group, number 12425.
    4. 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.
    5. Carsten Fink & Aaditya Mattoo & Ileana Cristina Neagu, 2002. "Trade in International Maritime Services: How Much Does Policy Matter?," The World Bank Economic Review, World Bank, vol. 16(1), pages 81-108, June.
    6. World Bank, 2005. "World Development Indicators 2005," World Bank Publications - Books, The World Bank Group, number 12426.
    7. 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.
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    More about this item

    Keywords

    LAEBA; Transport costs; Air transport liberalization; Infrastructure; Trade; Regulatory quality; Open Skies Agreements;
    All these keywords.

    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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