Regional Airports and Economic Growth: Evidence from the Single European Aviation Market

Abstract

This paper exploits market changes induced by the Single European Aviation market liberalization initiative to bring new evidence on the link between regional airports and economic development. Using administrative level data for the EU-15, a difference-in-differences research design is applied to identify the causal effects and spillovers of regional airports on local economic activity, population, and employment. The results suggest that the presence of regional airports on economic activity in the EU is positive and ranges between 2 and 6 percent. Population levels increase between 1 and 3 percent and the effect on employment is in the magnitude of 2 percent. An additional instrumental variable estimation points towards a similar outcome, with each additional 1 million passengers yielding to a positive effect between 2 and 3 percent on GDP.