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date: 15 November 2019

Abstract and Keywords

Given the continental scale and relatively low population density of the United States, transportation has always been, and remains, a vital service connecting sources of supply with demand. Over time, technological change within specific modes of transportation and differences and competition between water, land, and air modes of transportation have dramatically lowered shipping and travel costs—eventually by well over 90–95 percent in real terms. These changes have both created and diverted trade, promoting economic growth and shaping development. However, the existence of substantial positive externalities also creates a significant gap between social and private benefits so that transportation services are often undersupplied by the market, leading to frequent but inconsistent and intermittent public-sector interventions that have been reinforced by financial volatility arising from the cost structure of the industry.

Keywords: supply, demand, market, public sector, transportation

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