IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

The effect of air transport on the production of goods and services

  • Nicholas Sheard


This paper estimates the effect of air transport on local production in the manufacturing and service sectors. The analysis is conducted using data from the United States. These effects are important for the design of policies that aim to develop an airport or to otherwise attract airlines to operate to and from the airport. This type of policy is commonly employed by national and local governments, indeed most large commercial airports in the United States and Canada are publicly owned. Though it is common for local authorities to construct new runways, terminals, or other facilities, the effects of such policies are not currently well understood. The estimation of the effect of airport size on local production is subject to an obvious endogeneity problem, as airlines are likely to expand operations in response to increased demand. This problem is addressed by using the 1944 National Airport Plan of the Civil Aeronautics Administration to instrument for the distribution of airports. The National Airport Plan passes the statistical tests for relevance and exogeneity, which is not surprising as the federal funding connected to it was important for the rapid development of the air network after the Second World War and the criteria used to select sites was unrelated even to the contemporary distribution of sectors. Better air connections are found to have a positive effect on the size of the local service sector, with an elasticity of approximately 0.2. A larger airport – hosting more frequent flights to a wider range of destinations – is associated with a greater share of the population in the metropolitan area being employed in the service sector. This is interpreted as indicating that services are being produced in the metropolitan areas with larger airports for export elsewhere. There appears to be no effect on non-tradable services, such as beauty salons and auto repair, precisely as we would expect. The effect on manufacturing is negative, though this appears to reflect substitution to the expanded service sector rather than a direct effect, as the analysis of manufacturing shipments between pairs of cities does not appear to be related to air traffic.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa12p429.

in new window

Date of creation: Oct 2012
Date of revision:
Handle: RePEc:wiw:wiwrsa:ersa12p429
Contact details of provider: Postal: Welthandelsplatz 1, 1020 Vienna, Austria
Web page:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. James E. Rauch, 2001. "Business and Social Networks in International Trade," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1177-1203, December.
  2. Nathaniel Baum-Snow, 2007. "Did Highways Cause Suburbanization?," The Quarterly Journal of Economics, MIT Press, vol. 122(2), pages 775-805, 05.
  3. Gilles Duranton & Matthew A. Turner, 2009. "The Fundamental Law of Road Congestion: Evidence from US cities," NBER Working Papers 15376, National Bureau of Economic Research, Inc.
  4. Guy Michaels, 2008. "The Effect of Trade on the Demand for Skill: Evidence from the Interstate Highway System," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 683-701, November.
  5. Richard K. Green, 2007. "Airports and Economic Development," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 35(1), pages 91-112, 03.
  6. Redding, Stephen & Venables, Anthony J., 2004. "Economic geography and international inequality," Journal of International Economics, Elsevier, vol. 62(1), pages 53-82, January.
  7. Cristea, Anca D., 2011. "Buyer-Seller Relationships in International Trade: Evidence from U.S. States' Exports and Business-Class Travel," MPRA Paper 30347, University Library of Munich, Germany.
  8. Redding, Stephen J. & Sturm, Daniel M & Wolf, Nikolaus, 2007. "History and Industry Location: Evidence from German Airports," CEPR Discussion Papers 6345, C.E.P.R. Discussion Papers.
  9. Bruce A. Blonigen & Anca D. Cristea, 2012. "Airports and Urban Growth: Evidence from a Quasi-Natural Policy Experiment," NBER Working Papers 18278, National Bureau of Economic Research, Inc.
  10. Duranton, Gilles & Turner, Matthew A, 2008. "Urban Growth and Transportation," CEPR Discussion Papers 6633, C.E.P.R. Discussion Papers.
  11. Gilles Duranton & Peter M. Morrow & Matthew A. Turner, 2014. "Roads and Trade: Evidence from the US," Review of Economic Studies, Oxford University Press, vol. 81(2), pages 681-724.
  12. James E. Rauch & Vitor Trindade, 2002. "Ethnic Chinese Networks In International Trade," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 116-130, February.
  13. Ximena Clark & David Dollar & Alejandro Micco, 2004. "Port Efficiency, Maritime Transport Costs and Bilateral Trade," NBER Working Papers 10353, National Bureau of Economic Research, Inc.
  14. Dave Donaldson, 2010. "Railroads of the Raj: Estimating the Impact of Transportation Infrastructure," NBER Working Papers 16487, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wiw:wiwrsa:ersa12p429. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gunther Maier)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.