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The role of direct flights in trade costs

Author

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  • Yilmazkuday, Demet

    (Florida International University)

  • Yilmazkuday, Hakan

    (Florida International University)

Abstract

The role of direct flights in trade costs is investigated by introducing and using a micro price data set on 49 goods across 433 international cities covering 114 countries. It is shown that having at least one direct flight reduces trade costs by about 1,400 miles in distance equivalent terms, while an international border increases trade costs by about 14,907 miles; hence, the positive effects of having at least one direct flight between any two cities can compensate for about 10% of the negative effects of an average international border. Trade costs also decrease with the number of direct flights: on average, one direct flight reduces trade costs by about 305 miles in distance equivalent terms, which corresponds to 7% of the average distance and can compensate for about 2% of the negative effects of an average international border. The results are shown to be robust to alternative empirical strategies.

Suggested Citation

  • Yilmazkuday, Demet & Yilmazkuday, Hakan, 2014. "The role of direct flights in trade costs," Globalization and Monetary Policy Institute Working Paper 179, Federal Reserve Bank of Dallas.
  • Handle: RePEc:fip:feddgw:179
    DOI: 10.24149/gwp179
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    References listed on IDEAS

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    Cited by:

    1. Hakan Yilmazkuday, 2017. "A Solution to the Missing Globalization Puzzle by Non-CES Preferences," Review of International Economics, Wiley Blackwell, vol. 25(3), pages 649-676, August.
    2. Helble, Matthias, 2014. "The Pacific's Connectivity and Its Trade Implications," ADBI Working Papers 499, Asian Development Bank Institute.

    More about this item

    Keywords

    economic integration; foreign exchange;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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