Leavin' on a jet plane.....

Very cool new paper just out in the QJE by Campante and Yanagizawa-Drott.

Here's the abstract :


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 gives rise to a discontinuity in connectedness between cities at a distance of 6,000 miles. We show that improving an airport’s position in the network of air links has a positive effect on local economic activity, as captured by satellite-measured night lights. We 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, the results suggest that increasing interconnectedness induces links between businesses and generates economic activity at the local level but also gives rise to increased spatial inequality locally, and potentially globally.

And you can see an ungated version of the paper here.


The regression discontinuity design exploits the rule that flights over 12 hours need a third pilot. That worked out to be flights of over 6000 miles. So city pair flight connectedness drops at that 6000 mile point due to the discontinuity in costs. This exogenous variation in connectedness creates variation in economic activity.

Nice to see a paper with super cool identification also be about something important!  And this isn't the first such paper for Yanagizawa-Drott, as he also wrote the excellent "hate radio in Rwanda" paper.