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Do changes in air transportation affect productivity? A cross-country panel approach

Do changes in air transportation affect productivity? A cross-country panel approach
Do changes in air transportation affect productivity? A cross-country panel approach

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%.

air transport, aviation, causal inference, instrumental variables, productivity
493-505
AitBihiOuali, Laila
7b10e1b1-25e7-4629-b96e-d5bf8de362a7
Carbo, Jose M.
e7326d8d-8341-4754-a4ac-5995b5a1a572
Graham, Daniel J.
8518a1e4-74ce-47f2-8ed3-4f63720c6807
AitBihiOuali, Laila
7b10e1b1-25e7-4629-b96e-d5bf8de362a7
Carbo, Jose M.
e7326d8d-8341-4754-a4ac-5995b5a1a572
Graham, Daniel J.
8518a1e4-74ce-47f2-8ed3-4f63720c6807

AitBihiOuali, Laila, Carbo, Jose M. and Graham, Daniel J. (2020) Do changes in air transportation affect productivity? A cross-country panel approach. Regional Science Policy and Practice, 12 (3), 493-505. (doi:10.1111/rsp3.12280).

Record type: Article

Abstract

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%.

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Region Sci Policy Practice - 2020 - AitBihiOuali - Do changes in air transportation affect productivity A cross‐country (1) - Version of Record
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More information

Accepted/In Press date: 29 March 2020
Published date: 1 June 2020
Additional Information: Publisher Copyright: © 2020 The Authors. Regional Science Policy & Practice published by John Wiley & Sons Ltd on behalf of Regional Science Association Copyright: Copyright 2020 Elsevier B.V., All rights reserved.
Keywords: air transport, aviation, causal inference, instrumental variables, productivity

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Local EPrints ID: 453560
URI: http://eprints.soton.ac.uk/id/eprint/453560
PURE UUID: b65bd3ad-8536-49ed-bad0-08ab05d0d05f

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Date deposited: 19 Jan 2022 18:06
Last modified: 16 Mar 2024 14:50

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Contributors

Author: Jose M. Carbo
Author: Daniel J. Graham

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