Gains from air connectivity: effects on manufacturing firm emissions

Air transport is known for its role in promoting economic growth and global trade. However, its potential effects for promoting technological advancement and reducing pollution emissions from manufacturing firms have yet to be well studied. This study aims to identify the causal effects of city air connectivity on the manufacturing firm emissions in China by matching firm data with city aviation development data from 2005 to 2013. We focus on sulfur dioxide (SO2) emissions because of their detrimental impact on human health. An air connectivity index is constructed to measure how well each city is connected to the aviation network. Using instrumental variable methods, we find that a 1% increase in city air connectivity leads to a 0.1% decrease in SO2 emissions from manufacturing firms. This reduction is driven by technological advancements in both production and emission control processes, facilitated by a more accessible aviation network and the increased interactions of business travelers. The underlying mechanisms operate through three key channels: (1) enhanced green production efficiency at the firm level, (2) increased patent applications at the firm level, and (3) city-level growth in the scientific research and technical services industry. We use these estimates to quantify the deaths prevented and years of life saved by the improved air quality caused by enhanced air connectivity. These findings underscore the significant environmental and public health co-benefits of strengthening city air connectivity, highlighting aviation infrastructure as a viable pathway toward sustainable and healthy urban development.