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Long-Range Growth: Economic Development in the Global Network of Air Links

Filipe Campante, David Yanagizawa-Drott

NBER Working Paper No. 22653
Issued in September 2016
NBER Program(s):Development Economics, Economic Fluctuations and Growth, International Trade and Investment, Political Economy

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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Document Object Identifier (DOI): 10.3386/w22653

Published: Filipe Campante & David Yanagizawa-Drott, 2018. "Long-Range Growth: Economic Development in the Global Network of Air Links*," The Quarterly Journal of Economics, vol 133(3), pages 1395-1458.

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