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Contribution Details

Type Working Paper
Scope Discipline-based scholarship
Title Long-range growth: economic development in the global network of air links
Organization Unit
  • Filipe Campante
  • David Yanagizawa-Drott
  • English
Institution University of Zurich
Series Name UBS Center Working Paper Series
Number 16
ISSN 2296-2778
Number of Pages 35
Date 2016
Abstract Text 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.
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Keywords Globalization, air travel, connections, economic activity, local development, cities, business links, FDI, convergence, spatial inequality