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

Filipe Campante () and David Yanagizawa-Drott ()

No 16, UBSCENTER - Working Papers from UBS International Center of Economics in Society - Department of Economics - University of Zurich

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.

Keywords: Globalization; air travel; connections; economic activity; local development; cities; business links; FDI; convergence; spatial inequality (search for similar items in EconPapers)
JEL-codes: F15 F21 F23 F63 O11 O18 O19 O47 R11 R12 R40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-gro, nep-int, nep-net and nep-ure
Date: 2016-11
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Related works:
Journal Article: Long-Range Growth: Economic Development in the Global Network of Air Links (2018) Downloads
Working Paper: Long-Range Growth: Economic Development in the Global Network of Air Links (2016) Downloads
Working Paper: Long-Range Growth: Economic Development in the Global Network of Air Links (2016) Downloads
Working Paper: Long-Range Growth: Economic Development in the Global Network of Air Links (2016) Downloads
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