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.
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