Conference Papers 2014

Seminar
Day 1 (29 Sep 2014), Session 1, Economics of Air Transport, 11:00 - 13:00

Status
Accepted, awaiting documents

Submitted by / Abstract owner
Volodymyr Bilotkach

Authors
Volodymyr Bilotkach, Newcastle University, Paulos Ashebir Lakew, University of California, Irvine

Short abstract
We evaluate effects of air traffic and delays on several indicators of regional economic development using a panel data from the US

Abstract
Studies of effects of air traffic on regional economic development ignore the fact that some of the observed effects may be generated by travel disruptions (e.g., some of the jobs created by air travel cater to passengers stuck at the airport after missing their connections). Therefore, ignoring air traffic delays leads to upward biased estimates of the effects of air travel. Further, simply measuring the relationship between traffic and local development, even if done when properly accounting for the underlying simultaneity, does not address the issue of the transmission mechanisms and the desirability of some of the growth effects. By controlling for the effects of travel disruption, we are able to begin addressing these issues.

This study measures effects of air traffic and delays on several conventional indicators of regional economic development. We use US airport-level quarterly panel data for 2003-2012 for this. Our delays data are very detailed, containing information on delays by both stage of flight (departure, arrival, and en route), and source (weather, carrier, late aircraft, etc.). We use conventional panel data analysis techniques, accounting for endogeneity of air traffic by using the instrumental variables approach. Preliminary data analysis results indicate two things. First, delays do have an impact on the local employment levels in the service industry. Second, the measured impact of air traffic on local service industry employment is reduced by about 25 percent once delays are accounted for.

Our study also contributes to the debates on the effects of airport congestion. As we are able to observe delays that are both endogenous and exogenous to the carriers, we can make inferences as to whether the effects of travel disruptions are different for these two types of delays. In particular, previous studies of the effects of delays on airfares have demonstrated that weather delays have the largest effect on prices.