What Drives the High Price of Road Freight Transport in Central America?
In Central America, like many other developing regions, high transport costs are cited as an impediment to trade and economic growth. Prices for road freight transport -- a key mode of transport comprising a significant share of total transport cos...
| Main Authors: | , , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2014/04/19432378/drives-high-price-road-freight-transport-central-america http://hdl.handle.net/10986/18325 |
| Summary: | In Central America, like many other
developing regions, high transport costs are cited as an
impediment to trade and economic growth. Prices for road
freight transport -- a key mode of transport comprising a
significant share of total transport costs for intra- and
extra-regional trade, are particularly high. Averaging 17
cents per ton-kilometer on main trading routes, these rates
stand out even relative to other inefficient developing
country markets (e.g., central and west Africa). However,
the policy and other factors associated with increased
prices have not been well understood. This paper uses data
from a survey of trucking companies operating on the
region's main trade corridors to analyze the
determinants of firms' costs of providing service, as
well as the effect of market structure and competition on
prices. The analysis finds that whereas improved cost
efficiencies could reduce prices by 3 cents per
ton-kilometer, increased competition on national routes --
those entirely within a nation's borders -- would
reduce prices by significantly more. Although there are many
trucking companies, including small and somewhat informal
operators, the degree of competition varies by route because
of domestic restraints on competition and the prohibition on
international competition on national routes. The paper
shows empirically that imperfect competition accounts for at
least 35 percent of mean prices on national routes. In
addition, a lack of competition is likely to explain the
persistence of an inefficient market structure, as well as a
lack of innovation to reduce costs and enhance the quality
of service. |
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