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Connectivity Impacts on Regional Economies and Innovation in the United States

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How do connections enabled by commercial aviation affect long-run economic growth and innovation? This paper studies the effects of aviation connectivity on regional economies in the United States. I construct a novel set of instruments based on the historical institutional and physical requirements for expanded air connectivity. To account for the network nature of aviation infrastructure, I use an improved measure of aviation activity, the Global Connectivity Index developed by Allroggen et al. (2015). This measure captures accessibility enabled by aviation better than passenger and departure numbers used in prior work. After accounting for endogeneity, I find that a 1% increase in a core-based statistical area (CBSA)’s Global Connectivity Index is associated with an increase in long-term total personal income by 1.7% and 6 more granted patents. For a CBSA like Myrtle Beach, SC, with a connectivity index close to the mean connectivity levels of CBSAs, a 1% increase in connectivity would bring about $218 million in total income over a two-decade period. Finally, I find that the impact of connectivity on regional economies is significantly more pronounced in the largest 100 cities, while these effects vanish in smaller cities. This paper shows, for the first time, the impact of aviation connectivity on innovation and provides suggestive evidence for aviation’s role in strengthening agglomeration economies.