08 January 2009

New research into benefits of liberalising air services arrangements

New econometric research is starting to be published on the web that uses the World Trade Organization's QUASAR database which scores bilateral air services arrangements based on their key features. QUASAR is being developed by the WTO Secretariat and uses information from the thousands of air services agreements (treaties) deposited with ICAO (see previous post).

The abstract of a WTO staff working paper Liberalization of Air Transport Services and Passenger Traffic UPDATED by Roberta Piermartini from the WTO and Linda Rousova from the Munich Graduate School of Economics dated December 2008 states:

"Using a gravity-type model to explain bilateral passenger traffic, this paper estimates the impact of liberalizing air transport services on air passenger flows for a sample of 184 countries. We find robust evidence of a positive and significant relationship between the volumes of traffic and the degree of liberalization of the aviation market. An increase in the degree of liberalization from the 25th percentile to the 75th percentile increases traffic volumes between countries linked by a direct air service by approximately 30 per cent. In particular, the removal of restrictions on the determination of prices and capacity, cabotage rights and the possibility for airlines other than the flag carrier of the foreign country to operate a service are found to be the most traffic-enhancing provisions of air service agreements. The results are robust to the use of different measures of the degree of liberalization as well as the use of different estimation techniques."

Two working papers from an OECD economist focus on the results for APEC economies:
GEM is the Groupe d'Economie Mondial at Sciences Po in Paris.

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