Journal Article

Long-Range Growth: Economic Development in the Global Network of Air Links

Filipe Campante and David Yanagizawa-Drott

in The Quarterly Journal of Economics

Volume 133, issue 3, pages 1395-1458
Published in print August 2018 | ISSN: 0033-5533
Published online December 2017 | e-ISSN: 1531-4650 | DOI: https://dx.doi.org/10.1093/qje/qjx050
Long-Range Growth: Economic Development in the Global Network of Air Links

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  • International Trade
  • International Factor Movements and International Business
  • Economic Development
  • Economic Growth and Aggregate Productivity
  • Urban, Rural, and Regional Economics
  • Transportation Systems

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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 gives rise to a discontinuity in connectedness between cities at a distance of 6,000 miles. We show that improving an airport’s position in the network of air links has a positive effect on local economic activity, as captured by satellite-measured night lights. We 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, the results suggest that increasing interconnectedness induces links between businesses and generates economic activity at the local level but also gives rise to increased spatial inequality locally, and potentially globally.

Journal Article.  24398 words.  Illustrated.

Subjects: International Trade ; International Factor Movements and International Business ; Economic Development ; Economic Growth and Aggregate Productivity ; Urban, Rural, and Regional Economics ; Transportation Systems

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