Article

Diseconomies in the transportation market

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Abstract

The transportation market is characterized, from an economic standpoint, by specificities; which separate it from other service markets. What stands out most from the transportation market is its heterogeneity: demand by displacement, supply of services and its price determination. Institutional arrangements used to organize the transportation system to generate externalities: positives (as a byproduct of agglomerated economic activities and cost efficiency improvement related to the institution), and negatives (increase private and social costs, which too separates it from other service markets); this implies that if a corrective mechanism is not introduced, nor policies to reduce the impact, the burden stemming from these externalities would be inherited by society as a whole. There are thus two variables worth studying: market competition (being that the market by itself tends to have failures), and regulation (when the public services provided by the government have failures). In this chapter, we present a case study of Costa Rica, showing how inefficiencies within the transport system, coupled with the reduction of public investment in infrastructure - aspects which represent a main source of life dissatisfaction for the population - have led to the conversion from economies of agglomeration and opportunities generated by positive externalities due to the concentrated population and economic activities in the "Central Valley", located in the "Greater Metropolitan Area" (GMA; GAM, by acronym in Spanish), into diseconomies. These diseconomies normally are evident through a displacement of people and merchandise as an efficiency mechanism. The analysis suggests that in order to understand further the current situation it is imperative to seek through the complexities of the transportation market. This may be accomplished by new approaches to spatial economic and supplementary studies which warrant other ways of planning, regulating and managing transportation systems followed by innovative technical and physical interventions with long term effects. The information comes from various institutional sources and the statistics and a model for the estimations is used as the base for the analysis. The results suggest that should measures not be taken to reverting the transport system planning in the GMA, the country may steer away from territorial competitiveness and quality of life, with impact in environmental sustainability, integration and social cohesion. Finally, we are suggesting specific measures to help capture the positive externalities from transportation infrastructure and to curb the associated negative externalities.

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