Are airports engines of economic development? A dynamic panel data approach

Abstract

This paper applies the dynamic panel data generalized method of moments estimator to the data on commercial passenger air traffic at all primary airports in the United States to evaluate the impact of traffic volume and number of destinations served with non-stop flights on the key indicators of regional economic development. We find that number of destinations served with non-stop flights has a much clearer and more robust impact on level of employment, number of business establishments, and average wage in the region. Passenger traffic volume affects employment and average wage, but not number of establishments. At the sample median, connecting a metropolitan statistical area with an extra destination, keeping everything else constant, creates 98 jobs and facilitates the opening of four new business establishments that employ people. The corresponding numbers for the sample mean are 223 jobs and 15 businesses. The impact of air travel on regional economic development is influenced by competition on the respective airline markets.