Airline Tra±c and Urban Economic Development

This paper provides new evidence on the link between airline tra±c and employment in a metro area. The evidence con ̄rms the common view that good airline service is an important factor in urban economic development. Frequent service to a variety of destinations, re°ected in a high level of passenger enplanements, facilitates easy face-to-face contact with businesses in other cities, attracting new ̄rms to the metro area and stimulating employment at established enterprises. The empirical results show that a 10 percent increase in passenger enplanements in a metro area leads approximately to a 1 percent increase in employment in service-related industries. However, airline tra±c has no e®ect on manufacturing and other goods-related employment, suggesting that air travel is less important for such ̄rms than for service-related businesses. These estimates are generated controlling for reverse causality between employment and tra±c. The results imply that expansion of Chicago's O'Hare airport would raise servicerelated employment in the Chicago metro area by 185,000 jobs (this impact assumes that expansion raises tra±c by 50 percent). Thus, the expansion of O'Hare airport represents a powerful economic development tool, as argued by its proponents. Airline Tra±c and Urban Economic Development