Working Paper: CEPR ID: DP6185
Authors: Kristian Behrens; Carl Gaign; Jacques-François Thisse
Abstract: 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.
Keywords: economic geography; imperfect competition; interregional trade; transport deregulation; transport sector
JEL Codes: F12; F16; R12; R49
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Transport Deregulation (L91) | Lower Consumer Prices (D19) |
| Transport Deregulation (L91) | Increased Consumer Prices (Long Run) (E31) |
| Increased Spatial Agglomeration (R12) | Less Elastic Demand for Transport Services (L90) |
| Less Elastic Demand for Transport Services (L90) | Higher Markups by Carriers (L96) |
| Higher Markups by Carriers (L96) | Higher Freight Rates (L91) |
| Higher Freight Rates (L91) | Reduced Consumer Surplus (D11) |