The Shanghai–Beijing “Air Express” Service Model and its Impact on the Pricing Behaviour of Airlines

Purpose The infrastructure investment is one important source of economic growth in China in the past three decades. However it is not clear to what extent such investment affects development in rural area. The purpose of this paper is to explore this impact both conceptually and quantitatively, and draw policy implications from the empirical exercise. Design/methodology/approach The authors first describe the conceptual link between the transportation infrastructure and rural development, which motivates the empirical model. Then by utilizing an autoregressive distributed lag model, the authors estimate both the short- and long-run impacts of the transportation infrastructure on rural development, in terms of cereal yield and per capita net income of rural households. Findings The authors find that investment in transportation infrastructure positively affects rural development in China. In terms of cereal yield, a 1 percent increase in the road infrastructure (road length) leads to around 0.05 percent increase in cereal yield in the short-, and around 0.19 percent increase in the long-run. In terms of the per capita net income of rural households, a 1 percent increase in the road infrastructure results in around 0.14 percent increase in the short-, and its long-run impact is not statistically significant. The positive impacts lend supports to promote investment in the transportation infrastructure. To this end, in addition to the government funding, the participation of private capital can also be promoted through a number of channels, such as the build-operate-transfer, public-private partnership, and establishment of infrastructure investment bank. Originality/value This study evaluates the impacts of transportation infrastructure on rural development in China. Despite of the importance of infrastructure and rural development, there is a lack of study on the interaction between them. This paper intends to fill in this gap. In addition, implications drawn in this exercise can benefit policy makers not only in China, but also in other developing countries.

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“…2. One strand of the existing literature focusses on air transportation, see for example, Zhang (2011, 2012).…”

Section: Notesmentioning

confidence: 99%

Transportation infrastructure and rural development in China

Wang

Sun

2016

CAER

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“…This reduces consumer welfare. It is not known if Chinese airlines have resorted to collusive agreements to manage prices and market shares, but the anti-trust authorities need to be vigilant and the air-HSR competition deserves close monitoring (Zhang, 2011;Zhang and Round, 2011;Zhang, 2015).…”

Section: Discussionmentioning

confidence: 99%

Welfare implications for air passengers in China in the era of high-speed rail

Yang

Wang

et al. 2020

Transport Policy

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“…These findings have significant anti-trust implications. Historically, price collusion was common in China's aviation market and price-fixing activities were actually encouraged by the aviation authorities, particularly on the trunk routes (Zhang, 2011;Zhang and Round, 2011).…”

Section: Discussionmentioning

confidence: 99%

Understanding airline price dispersion in the presence of high-speed rail

Wang

Yang

et al. 2020

Transport Policy

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This paper examines the price dispersion among China's "Big Three", namely, Air China, China Eastern and China Southern in the presence of high-speed rail (HSR). It has been found that HSR is positively and significantly associated with airline price dispersion on the longhaul routes, which may suggest that the presence of HSR can facilitate airline cooperation in setting prices and outputs, thereby leading to greater price dispersion. However, on the shorthaul routes where HSR is highly substitutable, the HSR competition effect dominates, and smaller price dispersion is observed. All the market structure and competition variables included in this study support the conclusion that price dispersion is greater in more concentrated and more densely travelled markets. The contribution of airline cost to price dispersion is limited.

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The Shanghai–Beijing “Air Express” Service Model and its Impact on the Pricing Behaviour of Airlines

Cited by 9 publications

References 19 publications

Transportation infrastructure and rural development in China

Transportation infrastructure and rural development in China

Welfare implications for air passengers in China in the era of high-speed rail

Understanding airline price dispersion in the presence of high-speed rail

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