Gravity Model Estimation and Determinants for Japanese Air Transport Services Trade
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Abstract
This paper examined the determinants for bilateral air transport services trade between Japan and other countries by conducting empirical analysis based upon the gravity equation. The paper also provided the detailed examination of Japan’s liberalization of international air transport services and its impact on the bilateral trade in such services. The following major findings have been drawn. First, the Japanese government implemented gradual and phasein liberalization of international air transport services under the traditional bilateral framework and permitted new entrants as well as additional flights and routes in the bilateral market. On the other hand, the government did not promote marketoriented liberalization except in the bilateral relations with the US and Germany. Second, following the estimation results based upon gravity model, the size of economy, income level, and distance strongly affect air transport services trade between Japan and other countries. Third, the new liberal framework in the USJapan and GermanyJapan markets contributes to increasing both Japanese import and export of air transport services. Furthermore, Japan tends to export and import such services more in the relation with the countries whose airlines exercise beyond rights actively. Accordingly, one may conclude that marketoriented liberalization of international air transport services and liberalization of beyond rights will be beneficial to Japanese side as well as its counterparts.
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