Airports and Urban Growth: Evidence from a Quasi-Natural Policy Experiment

While significant work has been done to examine the determinants of regional development, there is little evidence on the contribution of air services toward this outcome. This paper exploits the unexpected market changes induced by the 1978 Airline Deregulation Act to bring new evidence on the link between airline traffic and local economic growth. Using data for almost 300 Metropolitan Statistical Areas (MSAs) over a two decade time period centered around the policy change, we exploit time variation in long-run growth rates to identify the effects of airline traffic on population, income and employment growth. Our results suggest that air service has a significant positive effect on regional growth, with the magnitude of the effects differing by MSA size and industrial specialization.