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No.129 Transport Services

The Limits of (De)regulation

No.129 Transport Services
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While deregulation and privatisation in the transport sector have led to increases in productivity in general, not all reform hopes have materialised. In particular, the reform of the provision of infrastructure services has not caused the expected mobilisation of private resources, and concession relations have been less stable and less efficiency-enhancing than expected. In view of current discussions of reform results, the Round Table focused on the following issues:

  •  Where are the limits for deregulation? The discussion identified the conditions under which competition and potential competition can be expected to work. More care has to be applied to single out the transport sub-sectors where these conditions hold. 
  • Which are the crucial factors that necessitate regulation? Many parts of the transport sector are fraught with indivisibilities, network economies, sector-specific assets or lack of resale markets for investment goods. Where these factors play an important role, regulation might improve the efficiency of the transport system. 
  • What is the role of the transaction costs of regulation? The neglect of (surrogate) market transaction costs, in particular in the case of vertical disintegration, has led to lower than expected benefits from the reforms. 
  • What is the cost of regulation? Regulatory policies have to take account of the information asymmetries between the actors involved. Monitoring and control costs have often prohibited the depoliticising of regulatory processes. The Round Table discussed to what extent a rule-bound, performance-based regulation could contain the friction resulting from discretionary regulatory powers.
Organisation for Economic Co-operation and Development; January 2006
164 pages; ISBN 9789282123461
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