Evaluating the effects of liberalization and modernization policies on aviation in small island developing states

This study analyzes the impact of liberalization and modernization policies on air passenger traffic from the United States (U.S.) to Small Island Developing States (SIDS), with a particular focus on Caribbean countries. Considering these nations’ heavy reliance on international tourism and air transport, the paper examines the effects of Open Skies agreements on passenger volumes on existing routes and the creation of new routes. It also assesses a broader reform implemented in the Dominican Republic, which involved institutional modernization, market liberalization, and compliance with international safety standards. Using U.S.-to-SIDS airport-pair data from 1996 to 2023 and applying methods such as linear probability models and synthetic difference-in-differences, the study finds that Open Skies agreements increase passenger traffic on existing routes but do not lead to the creation of new ones. In contrast, broader reforms—as in the Dominican Republic—boost both traffic and route diversification, even without an Open Skies agreement. The findings suggest that comprehensive reform packages are more effective than liberalization alone in enhancing air connectivity in SIDS.