Premium
Do changes in air transportation affect productivity? A cross‐country panel approach
Author(s) -
AitBihiOuali Laila,
Carbo Jose M.,
Graham Daniel J.
Publication year - 2020
Publication title -
regional science policy and practice
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.342
H-Index - 8
ISSN - 1757-7802
DOI - 10.1111/rsp3.12280
Subject(s) - endogeneity , panel data , instrumental variable , productivity , economics , simultaneity , econometrics , fixed effects model , air transport , air traffic control , demographic economics , labour economics , geography , macroeconomics , transport engineering , engineering , physics , classical mechanics , cartography
This paper quantifies the economic impact of air transportation worldwide using two panel data methods to assess the effect of air cargo and air passenger volumes on GDP per employee (aggregate labour productivity). Fixed effects methods and instrumental variables allow us to tackle endogeneity concerns and simultaneity biases. We first use a generalized method of moments specification (GMM) on a World Bank panel dataset containing information for all countries worldwide, separated into 264 areas over the period 1990‐2017. Results show that a 10% increase in air passengers is associated with a 0.6% increase in GDP per employee. Complementary instrumental variables estimates indicate a slight negative bias in this result, yielding an effect of 0.86%. Results are very similar for different parts of the world, with elasticity estimates ranging between 0.01 and 0.04, except in North Africa and Middle Eastern countries, where effects on labour productivity are found to be insignificant. Overall, air passenger traffic has a stronger and more positive effect on GDP per employee than air cargo. We conduct a complementary analysis at the European level using Eurostat data (NUTS2) and perform an analysis on over 300 European sub‐regions. Results indicate that air transport has a positive, stronger and more significant effect on GDP per employee than air cargo, with a 10% increase in air passengers being associated with a labour productivity increase of 3.2%.