Is the Regulation of the Transport Sector Always Detrimental to Consumers?

35 Pages Posted: 20 May 2008

See all articles by Kristian Behrens

Kristian Behrens

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE); Université de Bourgogne - LATEC

Carl Gaigne

French National Institute for Agricultural Research (INRA) - UMR 1302 SMART

Jacques-François Thisse

Catholic University of Louvain (UCL); Centre for Economic Policy Research (CEPR)

Date Written: March 2007

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 Classification: F12, F16, R12, R49

Suggested Citation

Behrens, Kristian and Gaigne, Carl and Thisse, Jacques-François, Is the Regulation of the Transport Sector Always Detrimental to Consumers? (March 2007). CEPR Discussion Paper No. DP6185. Available at SSRN: https://ssrn.com/abstract=1133829

Kristian Behrens (Contact Author)

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE) ( email )

34 Voie du Roman Pays
B-1348 Louvain-la-Neuve, b-1348
Belgium

HOME PAGE: http://www.core.ucl.ac.be:16080/~behrens/

Université de Bourgogne - LATEC

Pôle d'Economie et de Gestion
21066 Dijon Cedex
France

Carl Gaigne

French National Institute for Agricultural Research (INRA) - UMR 1302 SMART ( email )

4 allée Adolphe Bobierre
CS 61103
Rennes Cedex, 35011
France

Jacques-François Thisse

Catholic University of Louvain (UCL) ( email )

Place des Doyens 1
Louvain-la-Neuve, 1348
Belgium

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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