Zhang 2020
Zhang 2020
Zhang 2020
To cite this article: Fangni Zhang & Daniel J. Graham (2020): Air transport and economic
growth: a review of the impact mechanism and causal relationships, Transport Reviews, DOI:
10.1080/01441647.2020.1738587
Article views: 16
1. Introduction
Decisions on airport expansion often prove controversial. The potential stimulus effect of
expanded airport on economic growth is the major argument of proponents. Even though
there is little doubt that the development of air transport and economic growth are
strongly correlated, there is no consensus in the literature as to nature and magnitude
of the relationship between the two.
One of the main reasons is that causal linkages between aviation and the economy can
be difficult to observe. On the one hand, the aviation industry transports passengers and
cargo around the globe, facilitating access to markets, employment, resources, labour,
knowledge and technology, which could lead to economic growth. On the other hand,
economic success generates demand for air transport, in both passenger and freight
markets. In this sense, air transport could be both a “cause” and an “effect” of economic
performance. The causal analysis is of great theoretical and practical importance. It can
provide references to governments, airlines, airports, logistic companies, transportation
planners, other stakeholders and policy makers. Despite the obvious scope for bi-direc-
tional causality, the number of studies that examined the bi-directional causality is very
limited. Many studies in the field simply explore one direction or the other in isolation.
Another important issue that obscures a causal understanding of aviation is the existence
of market distortion. For example, due to inefficiencies in the allocation of slots, there are
considerable rents flowing through to the airlines and labour which means that the normal
channels through which economic activity is transmitted are distorted.
In this context, this paper provides a synthesis review of the current understandings of
(i) linkages between air transport and economic growth, (ii) the causal nature of the links
and (iii) imperfections and inefficiencies of the aviation market. A multi-stage approach is
employed to researching the literature. First, a scoping literature review is conducted to
identify relevant impact channels between air transport and the economy. The database
search approach is supplemented with the snowballing search method. The keywords (“air
transport”, “economic growth” and “impact”) are used to search several databases, i.e. Web
of Science, Scopus and Google scholar. We then undertake screening on the search result
checking relevance at the title, abstract and full-text levels. Short papers (less than five
pages), articles published in non-recognised venues, and those not written in English
are excluded. The snowballing literature search approach is then adopted to expand
the survey into relevant references that are cited by identified studies. These include pub-
lished articles in peer-reviewed journals and commissioned studies of major air transport
authorities. We synthesise the obtained literature and establish the conceptual framework
that describes the mechanism through which air transport interacts with the economy in
Section 2. Second, it is identified that the impacts of air transport on economic growth are
typically quantified by supply-chain effects and spillover effects, and the reversed impact is
often referred to as the feedback effects. We then classify the literature accordingly and
review the empirical evidence of each effect, respectively. Third, given that the potential
interaction is bi-directional, Section 3 inquires into the reciprocal causal relationship. Based
on the search results in previous stages, an additional keyword “causal” is used to filter the
results. Fourth, Section 4 reviews the market imperfections and inefficiencies that are dis-
cussed in existing literature. We apply additional keywords to search for ancillary studies
that are relevant to “slot allocation”, “rent-seeking”, “failure airport planning”, “flow imbal-
ance”, and “negative impact”, respectively. Based on the reviewed literature, several
research gaps are identified and discussed in Section 5, and conclusions are provided in
Section 6.
interaction channels and review the empirical evidence associated with each of them,
respectively.
maintenance, air traffic control and management, and air passenger services, as well as
those of aerospace manufacturers selling aircraft and components to airlines and
related businesses. “Indirect impacts” include employment and activities of suppliers to
the air transport industry, e.g. aviation fuel suppliers, construction companies that build
airport facilities, suppliers of sub-components used in aircraft, manufacturers of goods
sold in airport retail outlets, and activities in the business services sector (call centres, IT,
accountancy, etc.). “Induced impacts” are generated from the spending of those directly
or indirectly employed in the air transport sector supports jobs in industries such as
retail outlets, companies producing consumer goods, and a range of service industries
(banks, restaurants, etc.).
National and regional estimations of the supply-chain effects are often based on input–
output models, which describe how indirect industries utilise the output of a particular
industry as inputs in the production of goods or service, and report how much spending
is supported by the employees of the industry and its full supply chain, i.e. the induced
output (Ambargis & Mead, 2012; Barol, 1989; Batey, Madden, & Scholefield, 1993; Butler
& Kiernan, 1986; FAA, 2016; Oxford Economics, 2014). The benefits and limitations of
input–output models are discussed in Yu (2018).
new economy employment (Button & Taylor, 2000). A more general framework is intro-
duced by Brueckner (2003) and extended by many others (e.g. Green, 2007; Percoco,
2010) to assess the effect of air transport activities on economic performance while con-
trolling for characteristics of the local economy, such as population, location endowment,
climate, and tax burden.
Regarding determinants of the spillover effects, passenger and cargo activities attracted
the most attention. Many studies established strong associations between passenger
movement and regional economic indicators. In particular, Brueckner (2003) finds that a
10% increase in passenger enplanement is associated with a 1% increase in employment
in service-related industries, and no effect on manufacturing-related employment. A series
of subsequent studies (Baker, Merkert, & Kamruzzaman, 2015; Blonigen & Cristea, 2015;
Green, 2007; Marazzo, Scherre, & Fernandes, 2010; Percoco, 2010; Sellner & Nagl, 2010)
echo that air passenger flow is a powerful predictor of regional growth, measured by
the employment, investment, income, population, or GDP growth, using data from
varies economies. While the above studies primarily focus on the realised passenger
volume, Sheard (2014) examines the effect of airport size using the designed passenger
capacity and finds that the intended passenger volume does not lead to total local
employment growth. The positive effect of new airport on economic growth is also ident-
ified in Tveter (2017) and Gibbons & Wu (2019).
With respect to the effect of air cargo activity, Green (2007)’s results suggest that it has
little predictive power for regional population and employment than passenger move-
ment. Chang and Chang (2009) and Button and Yuan (2013) then explicitly investigate
the causal relationship between air cargo volume and economic growth (in terms of
employment and GDP, respectively) using Granger (1969)’s method. The difference in
their results is partly driven by the extent the model addresses the endogeneity issue,
which will be discussed in Section 3.
Apart from passenger and cargo volumes, other key indicators that are identified
include the network centrality (Irwin & Kasarda, 1991), the airport size/capacity (Sheard,
2014, 2019), the number of direct destinations and the aircraft volume (Bilotkach, 2015).
Appendix A summarises some studies that examine the spillover effects of air transport
that appear in peer-reviewed journals. It shows that estimates from the US market gener-
ally indicate that the effect of passenger volume on total employment (pooled sectors)
ranges from 0.03 to 0.08, indicating that doubling air passenger volume is typically associ-
ated with a 3–8% growth in total employment in the region. While the effect of air passen-
ger on service-related employment is between 0.1 and 0.2, there is no obvious relationship
between air passenger movement and goods-related employment.
sheds insights on the locational determinants of regional airports, suggesting that they
should include not only population and income measures but also whether a metropolitan
area has the state capital which reflects the strategic competitiveness of the local
economy. Bonnefoy (2008) further shows that forecast of future economic growth
within the metropolitan area is the key factor influencing the decision on either expanding
an existing airport or building a new one. To help attract or secure an airline service in
smaller communities, possible government intervention schemes are discussed in
Nolan, Ritchie, and Rowcroft (2005).
The second channel of the feedback effects, demand generation, refers to the effect
that growth in economy leads to growth in air travel demand. It is often measured by
the income elasticity of air transport demand. Appendix B summarises the estimation
results from Brueckner (1985), Oum, Zhang, and Zhang (1993), Graham (2000), Dargay
and Hanly (2001), Njegovan (2006a), Njegovan (2006b), IATA (2007), Chi and Baek
(2012a), Chi and Baek (2012b), Yao and Yang (2012), DfT (2013), Lakew (2015), Lo, Wan,
and Zhang (2015), Bourguignon and Darpeix (2016). In general, the median income elas-
ticity in between 1.186 and 1.546 (according meta-analysis results of Gallet & Doucoulia-
gos, 2014; Gillen, Morrison, & Stewart, 2003), suggesting that air travel is a luxury good
and a slightly immature market (Graham, 2000).
The income elasticity estimates have widespread applications in air travel demand fore-
casting (e.g. DfT, 2013; Lo et al., 2015; Oum, Waters, & Yong, 1992; Wadud, 2014).4 The
rationale is that a larger value of the income elasticity implies a greater response of air
travel to changes in income, thus placing greater (lesser) pressure on air transport
systems during periods of rising (falling) income (Gallet & Doucouliagos, 2014).
However, there is an underlying assumption in this approach – economic development
does causally lead to air travel growth. While regressions can produce strong correlations,
the causal relationship between the two terms is not identified. Whether economic growth
causes air traffic change, or alternatively, air traffic change causes economic growth, or
they just coincidently have the similar trend, arises as an unanswered question. This
gives rise to the discussion in the next section.
air service before the companies actually expand. Thus, it is the promise of economic devel-
opment that leads to air transport growth rather than the development itself.
Apart from serving as the theoretical basis for other streams of studies, causal analysis
itself is of great theoretical and practical importance. It can provide references to govern-
ments, airlines, airports, logistic companies, transportation planners, other stakeholders,
and policy makers. For example, in the presence of a causal effect from economy to air
transport, the responsible stakeholder can undertake appropriate infrastructure planning
and secure investment when there is a predicted increase in the economy. The reverse
direction of the causal relationship reveals whether, and to what extent, air transport
should be fostered in order to realise economic growth. When facing limited resources,
the knowledge of causality provides guidance in making decisions on whether to invest
in the aviation side or the economy side directly. In view of its importance, the number
of studies that have examined the bi-directional causality is very limited.
In the literature, the bi-directional (reciprocal) relationship is often examined by simul-
taneous equations in the form
y1 = y2 g1 + x1′ b1 + 11 (1)
and
y2 = y1 g2 + x2′ b2 + 12 , (2)
where y1 represents the economic indicator; y2 represents the measure of air transport; x i
(i = 1, 2) is a vector of exogenous variables correlated with yi ; gi and bi are vector of coeffi-
cients to be estimated; and 1i is an error term. It is noteworthy that the causality discussion
mainly concerns the validity of spillover effects (from air transport to economic growth)
and the feedback effects (from economic growth to air transport) in the causal sense.
Although the reciprocal relationship involves both Equations (1) and (2), many papers
that address the “economic impacts of air transport” focus on Equation (1). Among this
branch of work, the instrumental variables (IV) estimation is commonly used to mitigate
the impact of reverse causality. This approach entails an IV that is highly correlated with
the endogenous explanatory variable y2 but uncorrelated with the error term 11 in
Equation (1). The corresponding estimation process normally includes two stages (i.e.
the two-stage least squares method, 2SLS). The IVs that employed in spillover effects
studies include the hub status, geographic centrality, proximity to a hub airport, capacity
control policy, special leisure attractions (Brueckner, 2003); the lagged population growth,
distance to coastline (Green, 2007); and the number of hotels (Percoco, 2010). While all
studies find significant and positive spillover effects of air transport, none of them reject
the null hypothesis of zero correlation between the air transport measure y2 and the
error term 11 of Equation (1). This indicates that, within their study scopes (1990 US and
2002 Italy), the feedback effects of employment growth on air traffic are not significant.
In addition to IV, study units can be properly selected to further prevent empirical
results from being contaminated by the reverse causality and/or other endogeneity con-
cerns. The difference-in-differences method is used in Blonigen and Cristea (2015) and
Tveter (2017) to compare the changes of interested variables associated with treatment
and control groups, which are believed to be endogenous and exogenous, respectively.
When analysing the airline network expansion in China, Gibbons & Wu (2019) work with
counties that locate midway between existing and new airports. It is supposed that
TRANSPORT REVIEWS 9
these counties are “incidentally” affected by the network expansion as they were not expli-
citly targeted for development nor directly affected by airport operations and thus the
analysis reflects higher causality credibility. Similarly, Campante and Yanagizawa-Drott
(2018) study the impact of direct long-distance air links on economic performance by com-
paring routes that are just under 6,000 miles with those slightly above that threshold.
Under the assumption that those pairs across the threshold are not systematically
different, the variation in economic outcomes reflects the effect of air transport when con-
trolling for exogenous factors.
The parameters of Equations (1) and (2) can be identified simultaneously using some
specific strategies. The maximum likelihood method is adopted in Irwin and Kasarda
(1991) to fit the simultaneous Equations (1) and (2). They show that both g1 and g2 are
positive but only g1 is statistically significant. In the studied context, the results imply
that the primary causal effect is from the change in airline network centrality to the
growth of total employment in US metropolitans between 1950 and 1980. The feedback
effect of employment growth on airline network centrality is only marginal.
Recent studies commonly adopt the Granger (1969)’s method to examine the validity of
bi-directional causal relationship. A variable A is said to “Granger cause” another variable B
if B is better predicted by using past values of A, in addition to past values of B, and vice
versa. Button et al. (1999) is among the first to use Granger (1969)’s method to study the
causal relationship between air traffic and economic performance (income and employ-
ment) based on metropolitan data of the US. The analysis is then extended to economies
in Europe, Asia-Pacific, and America over various periods (Baker et al., 2015; Brida, Bukstein,
& Zapata-Aguirre, 2016a; Brida, Rodríguez-Brindis, & Zapata-Aguirre, 2016b; Button & Yuan,
2013; Chang & Chang, 2009; Fernandes & Pacheco, 2010; Hakim & Merkert, 2016; Marazzo
et al., 2010; Mukkala & Tervo, 2013; Van De Vijver, Derudder, & Witlox, 2014).
However, by its definition, the Granger causality reflects the “predictive causality” but
does not necessarily warrant true causality. If both A and B are driven by a common
third process with different lags, one might still fail to reject the alternative hypothesis
of Granger causality and so forth to produce misguiding results (Maziarz, 2015). Several
extensions have been proposed to address latent confounding effects and non-linear
causal relationships that are not considered in the original form of Granger causality
test (Eichler, 2012).
Table 2 summarises some studies that explicitly investigate both directions of the
causal relationship simultaneously (studies that only deal with one direction are
omitted). It appears that this body of literature can be categorised into two main
streams, i.e. those find a uni-directional causal relationship running from air transport
growth to economic growth, and those find a bi-directional causal relationship.5
In general, most studies establish evidence that air transport has positive economic
impacts as shown in the “causality R(1)” column. Thus, the spillover effect from air trans-
port to economic performance is broadly validated by causal analyses worldwide
(although in some contexts it is weekly or marginal significant). The major difference
between the two streams lies in the existence of the reversed causal link from economic
growth to air transport (feedback causal link), shown in the “causality R(2)” column.
Studies of the first stream are based on data from the US and Europe, which are higher
income countries with relatively mature aviation markets. Studies from these economies
tend to decline the feedback causal link: this link is either not present at all in a causal
10
F. ZHANG AND D. J. GRAHAM
Table 2. Studies explicitly examined the two directions of causal relationships between air transport and economic performance.
Causality R Causality R(2): Peer-reviewed journal &
Air traffic measure Economic (1): Air Economy Study unit & Impact factor 2018
Article (s) measure(s) Economy Air Identified causal relationship period Method (CiteScore 2018)
Uni-direction: AirEconomy
Irwin and Centrality in Emp Evident Not evident R(1): CentralityEmp: 0.429 US 1950–1980 Maximum American Sociological
Kasarda network likelihood Rev. 5.391 (7.060)
(1991) estimation
Button et al. Pax Hightech Evident Not evident R(1): HubHightech Emp+12,000 US 1979–1997 Time-series J. of Air Transp. Mgmt.
(1999) Emp Granger test 2.412 (3.27)
Brueckner Pax Emp Evident Not evident R(1): PaxEmp: 0.08 US 1996 2SLS Urban Studies 3.272
(2003) (3.890)
Green (2007) Pax PC; Pop growth; Evident Not evident R(1): PaxEmp: 0.2 US 1990 2SLS Real Estate Econ. 1.764
Originations; Hub Emp growth (2.05)
(0-1); Cargo PC
Percoco (2010) Pax Emp; Pop Evident Weekly R(1): total/service Emp; R(2): weekly Italy 2002 2SLS Urban Studies 3.272
evident PopPax (3.890)
Button and Cargo Emp; Evident Not/Weekly R(1): evident; R(2): not evident for US 1990–2009 Panel Granger Urban Studies 3.272
Yuan (2013) Income; evident income; weakly for Emp test (3.890)
Income PC;
Mukkala and Pax Emp growth; Evident Weakly R(1): in remote regions; R(2): weakly Europe 1991– Panel Granger Envirm. & Planning A
Tervo (2013) GDP evident with 1-year lag 2010 test 2.459 (2.88)
Brida et al. Flights GDP Evident Not evident R(1): national aggregate Italy 1971–2012 Time-series International J. of Aviation
(2016a) Granger test Mgmt. 0.09
Bi-direction: AirEconomy & EconomyAir
Chang and Cargo GDP Evident Evident R(1)(2): in short & long-run; regional Taiwan 1974– Time-series J. of Air Transp. Mgmt.
Chang aggregate 2006 Granger test 2.412 (3.27)
(2009)
Marazzo et al. Pax GDP Weakly Evident R(1): moderate/slow; R(2): strong/ Brazil 1966–2006 Time-series Transp. Res. Part E 4.253
(2010) evident fast; national aggregate Granger test (5.50)
Van De Vijver Pax Trade Evident Evident R(1): between more & less developed Asia-Pacific Panel Granger J. of Transp. Geography
et al. (2014) country pairs, e.g. Australia-Thailand; 1980–2010 test 3.560 (4.41)
R(2): in liberalised markets, e.g.
Singapore
Baker et al. Pax Income Evident Evident R(1): with 2-year lag; R(2): with 1- Australian Panel Granger J. of Transp. Geography
(2015) year lag regional & test 3.560 (4.41)
remote airports
1985–2011
Hakim and Pax; Cargo GDP Weekly Evident R(1): weekly with 3–4 year lag; R(2): South Asia 1973– Panel Granger J. of Transp. Geography
Merkert evident GDPPax: 1.2; GDPcargo: 0.5 2014 test 3.560 (4.41)
(2016)
Brida et al. Pax GDP Evident Evident R(1))(2): national aggregate Mexico 1995– Time-series World Rev. of Intermodal
(2016b) 2003 Granger test Transp. Res. 0.17 (0.44)
Uni-direction: EconomyAir
Fernandes and Pax GDP Not evident Evident R(2): GDPPax: 1.00-2.11; national Brazil 1966–2006 Time-series Transp. Planning and
Pacheco aggregate Granger test Tech. 0.893 (1.07)
(2010)
Note: Pax = Passenger volume; Emp = Employment; Pop = Popolation; PC = Per Capita. Coefficients represent elasticities, for example, 0.429 in the first row means that 1% growth in network
centrality results to 0.429% growth in employment.
TRANSPORT REVIEWS
11
12 F. ZHANG AND D. J. GRAHAM
sense or only weakly evident conditional on certain constraints. It appears plausible that
the air transport is a relatively mature or even saturated market in these economies
such that the size of industries, and the rhythm of economic activities supporting the
supply and demand for air transport have reached a relatively stable equilibrium. The
demand for air transport is thus not sensitively or promptly affected by an incremental
change of an economic indicator such as income or employment.
Contrarily, the second stream mainly consists of studies from economies in Asia-Pacific
and South/Middle America where aviation markets are relatively immature. In these con-
texts, feedback causal link from economic growth to air transport growth dominates the
other direction of the causal relationship. Among these studies, it is worth highlighting
Baker et al. (2015) and Brida et al. (2016b). Baker et al. (2015)’s analysis focuses only on
Australian regional and remote airports, where the more mature metropolitan airports
are excluded. Brida et al. (2016b)’s analysis on the Mexican aviation market, using the
same econometric method, obtains a divergent conclusion from the same authors’
study on Italy, Brida et al. (2016a). This further confirms that the air travel demand in
the less-developed market is more sensitive to economic growth.
The observations imply that the causal effect of air traffic on economic growth is a
reasonable proposition; increases in air traffic do appear to have multiplier effects on
other industries of the economy. However, the feedback effect of economic growth on
air traffic is not as significant as believed in well-developed economies. While the variation
can be partly explained by spatial dimensions and specific contexts in a case-by-case
manner, the underlying factors influencing the inter-causal relationship remain unclear.
A systematic analysis involving intrinsic characteristics of particular economies is lacking
to uncover the driving factors, which will be discussed in Section 5.1.
(low load factors) appears to contribute significantly to airport inefficiency in terms of air
passenger movements. Unsatisfied demand, overbidding, late return of unwanted slots,
and failure to operate allocated slots (the so-called “no shows”) are all factors pointing
or contributing to the inefficient use of an already scarce/insufficient airport capacity
(Madas & Zografos, 2010). According to ICAO (2016), it is clear that the current slot allo-
cation system is likely insufficient to cope with the demand experienced by most of the
major airports.
5. Gaps
From our review of the literature, we can point to some important research gaps that are
worth of exploration in the future.
investigated by, for example, Mukkala and Tervo (2013), Van De Vijver et al. (2014), and
Hakim and Merkert (2016) for Europe, Asia-Pacific, and South Asia, respectively. Even
though we can qualitatively infer from comparing available empirical results, the systema-
tic and quantitative analysis is needed to reveal the implicit cause of heterogeneity. Future
studies should seek to identify the underlying factor that drives the potentially inter-causal
relationship. The conditional causality can be investigated using Geweke (1984)’s
approach on relevant time varying covariates, such as foreign direct investment, trade,
competitiveness of substitutes, and government subsidy.
attracting business investment and raising productivity at the aggregate level (Kasarda,
2000, 2008; Warffemius, 2007; Zhang, 2012). Air transport is a network business, and
hence connections will reinforce each other: more and better connections increase an air-
port’s attractiveness for others to connect. However, in some circumstances, the presence
of agglomeration economies may lead to a “siphon effect” (De Almeida, Haddad, &
Hewings, 2010; Graham & Guyer, 1999; Zhang, Wan, & Yang, 2019). That is, resources,
such as talents and investment, tend to flow from small cities to large cities, as the
latter possess better infrastructure, greater variety of products and services, a larger
market, and many other factors that improve efficiency of doing business. It is important
to improve our understanding of aviation-induced redistribution of economic activities
and uncover the potential siphon effect of air service accessibility.
6. Conclusions
This paper reviews the literature on links between air transport and the economy, focusing
in particular on our current understanding of the causal relationship.
The mechanisms through which air transport interacts with the economy are firstly ident-
ified. We find the key relationships are fundamentally endogenous. Despite this recognition,
much of the literature has simply sought to establish associational inference between air
traffic and economic performance, and issues of causality have often been overlooked.
For instance, the use of economic multipliers in estimation of supply-chain effects, or the
application of income elasticities in air traffic forecasts, is largely justified on the basis of
an a-priori assumptions that there is a causal effect from air transport to economic growth.
Specifically, the review leads to several new insights on the nature of aviation-economy
effects.
First, the relationship between air transport and the economy is bi-directional. While a
bi-directional causal relationship appears to be prevalent in less developed economies,
studies of countries with mature aviation markets tend to find positive effects from air
transport to economic growth but not vice-versa.
Second, causal effects from air transport to the economy can arise both through supply-
chain and spillover effects. Estimates of the effect of air passenger on service-related
employment lie between 0.1 and 0.2 but no obvious relationship is found between air pas-
senger movements and goods-related employment.
Third, in many instances, income elasticities are used to forecast air travel demand
across different economic contexts. However, the reviewed evidence suggests that the
underlying assumption of this approach may not always hold, i.e. the nature of feedback
effect can vary across economies and may change over time.
Finally, it is important to recognise that there are market imperfections that can impede
success in securing adequate air transport to facilitate economic development. To this end,
this paper reviews ancillary work related to the typical market imperfections and briefly
illustrates how these imperfections affect the economic efficiency of air transport.
It is noteworthy that air transport and economic growth are both broad topics that
include numerous aspects. This review, by focusing on the nature of the causal link, has
several limitations. First, this paper only considers commercial aviation services while
the roles of air transport in defence and extreme circumstances are not covered;
Second, the impact mechanism focuses on the interrelationship between air transport
TRANSPORT REVIEWS 17
and economy. While there are complex dynamics within either the aviation or economic
system, the internal impacts are not discussed. Third, the conceptual model reflects static
relationships while the competitive, responsive and dynamic nature of the aviation market
is not captured.
Notes
1. A link indicates a recognised influence where the impact elasticity can be large or small. Figure 1
omits the complex dynamics within the economic system, which is out of the scope of this
study.
2. In general, demand and supply interact with one another through decisions of consumers and
producers. There is no arrow pointing from “demand” to “supply” in Figure 1 because the pro-
ducers (airports and airlines) are involved. Presumably consumers cannot directly change the
supply and thus we consider that the impact of demand on supply takes effect only through
producers’ decisions.
3. The two channels are in fact interrelated, as usually where there is higher demand provides
larger capacity. Relevant studies on this issue are tentatively classified into the two channels
according to the emphasis of the research.
4. Although the income distribution among population is an important factor for decisions
related to airport capacity, it is often overlooked in income elasticity estimations.
5. There is a third stream that finds a reversed uni-directional causal relationship from economic
growth to air transport (Fernandes & Pacheco, 2010). Given that Fernandes and Pacheco
(2010) use the same dataset and same method as Marazzo et al. (2010), results published in
a higher-ranked journal with significantly higher impact factor are selected, i.e. Marazzo
et al. (2010). Thus, the last stream is omitted in the following discussion.
Disclosure statement
No potential conflict of interest was reported by the author(s).
Funding
This work was supported by the Engineering and Physical Sciences Research Council under grant
Airport Capacity Consequences Leveraging Aviation Integrated Modelling.
ORCID
Fangni Zhang http://orcid.org/0000-0003-3584-4679
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Appendices
22
Appendix 1. A summary of studies that examined the spillover effects of air transport on sectoral economic performance
Table A1. Studies examined the spillover effects of air transport on sectoral economic growth.
Studied enabling flow (denoted by Peer-reviewed journal & Impact factor 2018
Article y2 y 1 ) The elasticity of y1 with respect of y2 Study unit & period (CiteScore 2018)
Pooled Service-related
sectors Goods-related sectors sectors
Irwin and Kasarda Network centrality Emp 0.429 0.513 (manufacturing) 0.505 (producer US 1950-1980 American Sociological Rev. 5.391 (7.060)
(1991) service)
Brueckner (2003) Pax Emp 0.08 0 (goods) 0.1 (service) US 1996 Urban Studies 3.272 (3.890)
Green (2007) Pax Emp 0.028 – – US 1990 Real Estate Econ. 1.764 (2.05)
Cargo volume Emp 0
Percoco (2010) Pax Emp 0.024 – 0.052 (service) Italy 2002 Urban Studies 3.272 (3.890)
Sellner and Nagl (2010) Pax/Pop GDP 0.014 – – EU-15 1993–2006 Journal of Air Transp. Mgmt. 2.412 (3.27)
Pax/Pop investment 0.05
Marazzo et al. (2010) Pax GDP 0.0325 – – Brazil 1966–2006 Transp. Res. Part E 4.253 (5.50)
Sheard (2014) Airport capacity Emp 0 0 (manufacturing) 0.22 (tradable US 2007 Journal of Urban Econ. 2.447 (3.29)
service);
0 (non-tradable
service)
Baker et al. (2015) Pax income 0.01 – – Australia 1985– Journal of Transp. Geography 3.560 (4.41)
2011
Bilotkach (2015) FlightsWage 0.01 – – US 1993–2009 Urban Studies 3.272 (3.890)
Destinations Wage 0.02
Destinations Emp 0.013
Destinations Businesses 0.01
Blonigen and Cristea Pax Pop 0.031 – – US 1966–1991 Journal of Urban Econ. 2.447 (3.29)
(2015)
Tveter (2017) New airport(0-1) Pop 0.05 – – Norway 1970–1980 Research in Transp. Econ. 1.798 (2.20)
Gibbons & Wu (2019) Airport access Output (GDP) 0.2591 0.4164 (manufacturing) 0 China 2001–2010 Journal of Econ. Geography 3.359 (5.04)
Sheard (2019) Airport capacity Emp 0.04 – – US 1991–2015 Economica 1.5 (1.87)
Button et al. (1999) Hub airport (0-1) Emp 0.503 (high-technology)# US 1994 Journal of Air Transp. Mgmt. 2.412 (3.27)
Button and Taylor Pax Emp 0.0015 (new-economy)## US 1996 Journal of Air Transp. Mgmt. 2.412 (3.27)
(2000)
Note: Pax = Passengervolume; Emp = Employment; Pop = Popolation; PC = PerCapita. Coefficients represent elasticities, for example, 0.429 in the first row means that 1% growth in network cen-
trality results to 0.429% growth in employment. # in second last row represents that the existence of a hub airport increases high-technology employment by 50.3%. ## in last row indicates that 1.5
jobs are created in new-economy sectors for every 1,000 air passengers.
TRANSPORT REVIEWS 23
Table A2. Studies examined the income elasticity of air transport demand.
Peer-reviewed journal &
Demand Income Study unit& Impact factor 2018
Article Elasticity measure measure period (CiteScore 2018)
Brueckner 0.82–1.16 Regional Income per US 1970 International J. of Transp.
(1985) passenger capita Econ. 0.857 (0.56)
Oum et al. 0.163 Passenger Total income US 1981–1988 J. of Transp. Econ. & Policy
(1993) (JTEP) 1.027 (1.62)
Graham (2000) 2.2–2.5 International Consumer UK 1970–1998 J. of Air Transp. Mgmt.
leisure trip expenditure 2.412 (3.27)
Dargay and 1–2 International Real disposal UK 1989–1998 –
Hanly (2001) passenger income/trade
Njegovan 1.5 Passenger Consumer UK 1993–2003 J. of Air Transp. Mgmt.
(2006b) expenditure 2.412 (3.27)
IATA (2007) 1.6–1.8 (US); 1.2– Passenger GDP Worldwide –
1.6 (UK); 1.8–2.7 1994–2006
(Developing
countries)
Chi and Baek 3.74 Passenger Disposable US 1995–2010 Transp. Res. Part E 4.253
(2012a) income (5.50)
Chi and Baek 9.35 (cargo) Cargo GDP US 1996–2010 J. of Air Transp. Mgmt.
(2012b) 2.412 (3.27)
Yao and Yang 0.77–1.12 (cargo) Cargo GDP China 1995– Asia Pacific J. of Accounting
(2012) 2006 & Econ.
DfT (2013) 1.5 Passenger Consumer UK 1984–2008 –
expenditure
Lakew (2015) 0.32 (Passenger); Passenger/ Wage US 2003–2012 Transportation Research
0.26 (Cargo) Cargo Record 0.748 (1.11)
Lo et al. (2015) 0.29–1.47 Cargo GDP Hong Kong Transp. Res. Part A 3.693
2001–2013 (4.98)
Bourguignon 1–2 Passenger GDP Worldwide (by –
and Darpeix continents)
(2016) 1994–2013