The Universal Postal Union (UPU) system of terminal dues governs payments between designated postal operators for the transport, sorting, and delivery of cross-border letter post items in the destination country. UPU rates are used by many postal operators across the world, both directly and indirectly (as a fall-back provision). In a report from September 2014, Copenhagen Economics identified three types of potential market distortions created by the current UPU terminal dues system. One such distortion was the so-called financial transfers. Following the concept of distortive financial transfers, this report set out to numerically quantify the effects of such distortions.
Using a large data set of postal tariffs and volumes worldwide, we created a model of the financial transfers caused by the terminal dues system. The model compares the regulated terminal dues rates to a counterfactual rate based on domestic postage for each bilateral mail flow worldwide.
The main conclusions of our study are:
The study is commissioned by the US Postal Regulatory CommissionDownload