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Long-range growth: economic development in the global network of air links

Author

Listed:
  • Filipe Campante
  • David Yanagizawa-Drott

Abstract

We study the impact of international long-distance flights on the global spatial allocation of economic activity. To identify causal effects, we exploit variation due to regulatory and technological constraints which give rise to a discontinuity in connectedness between cities at a distance of 6000 miles. We show that these air links have a positive effect on local economic activity, as captured by satellite-measured night lights. To shed light on how air links shape economic outcomes, we first present evidence of positive externalities in the global network of air links: connections induce further connections. We then find that air links increase business links, showing that the movement of people fosters the movement of capital. In particular, this is driven mostly by capital flowing from high-income to middle-income (but not low-income) countries. Taken together, our results suggest that increasing interconnectedness generates economic activity at the local level by inducing links between businesses, but also gives rise to increased spatial inequality locally, and potentially globally.

Suggested Citation

  • Filipe Campante & David Yanagizawa-Drott, 2016. "Long-range growth: economic development in the global network of air links," UBSCENTER - Working Papers 016, UBS International Center of Economics in Society - Department of Economics - University of Zurich.
  • Handle: RePEc:zur:uceswp:016
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Richard Kneller & Danny McGowan, 2019. "The effect of airports on the growth of service exports," Discussion Papers 2019-10, University of Nottingham, GEP.
    2. repec:gam:jsusta:v:11:y:2019:i:8:p:2358-:d:224432 is not listed on IDEAS
    3. Stephan E. Maurer & Ferdinand Rauch, 2019. "Economic Geography Aspects of the Panama Canal," CEP Discussion Papers dp1633, Centre for Economic Performance, LSE.
    4. Dany Bahar, 2018. "The Hardships of Long Distance Relationships: Time Zone Proximity and Knowledge Transmission within Multinational Firms," CESifo Working Paper Series 7104, CESifo Group Munich.
    5. repec:bla:econom:v:86:y:2019:i:342:p:300-335 is not listed on IDEAS
    6. Fensore, Irene & Legge, Stefan & Schmid, Lukas, 2017. "Human Barriers to International Trade," Economics Working Paper Series 1712, University of St. Gallen, School of Economics and Political Science.
    7. Stef Proost & Jacques-François Thisse, 2019. "What Can Be Learned from Spatial Economics?," Journal of Economic Literature, American Economic Association, vol. 57(3), pages 575-643, September.
    8. Bahar, Dany, 2018. "The Hardships of Long Distance Relationships: Time Zone Proximity and Knowledge Transmission within Multinational Firms," IZA Discussion Papers 11697, Institute of Labor Economics (IZA).
    9. Ho Fai Chan & Bruno S. Frey & Ahmed Skali & Benno Torgler, 2019. "Political Entrenchment and GDP Misreporting," CREMA Working Paper Series 2019-02, Center for Research in Economics, Management and the Arts (CREMA).

    More about this item

    Keywords

    Globalization; air travel; connections; economic activity; local development; cities; business links; FDI; convergence; spatial inequality;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R40 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - General

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