IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_11364.html
   My bibliography  Save this paper

Communication Costs, Direct Flights and International Trade

Author

Listed:
  • Taiji Furusawa
  • Chang Sun
  • Heiwai Tang
  • Jiaxu Zhang

Abstract

We build a general equilibrium model of endogenous communication, quality control and trade. We derive a structural gravity equation from the model and show that exogenous communication costs raise the costs of quality control and have a larger impact on products with a lower elasticity of substitution. In our empirical application, we estimate the impact of direct flight connectedness on communication costs using the gravity equation. We overcome the identification challenge using an instrumental variable constructed based on the discontinuity of direct flights at around 6,000-mile distance due to air travel regulations. We find that air connectedness increases trade, especially for products with a low elasticity. We combine the empirical estimates and our equilibrium model to quantify the aggregate impact of air connectedness.

Suggested Citation

  • Taiji Furusawa & Chang Sun & Heiwai Tang & Jiaxu Zhang, 2024. "Communication Costs, Direct Flights and International Trade," CESifo Working Paper Series 11364, CESifo.
  • Handle: RePEc:ces:ceswps:_11364
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo1_wp11364.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Blonigen, Bruce A. & Cristea, Anca D., 2015. "Air service and urban growth: Evidence from a quasi-natural policy experiment," Journal of Urban Economics, Elsevier, vol. 86(C), pages 128-146.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bottasso, Anna & Conti, Maurizio & Vannoni, Davide, 2019. "Scale and (quasi) scope economies in airport technology. An application to UK airports," Transportation Research Part A: Policy and Practice, Elsevier, vol. 125(C), pages 150-164.
    2. Nicholas Sheard, 2019. "Airport Size and Urban Growth," Economica, London School of Economics and Political Science, vol. 86(342), pages 300-335, April.
    3. Lenaerts, Bert & Allroggen, Florian & Malina, Robert, 2021. "The economic impact of aviation: A review on the role of market access," Journal of Air Transport Management, Elsevier, vol. 91(C).
    4. Tu Anh Trinh & Ducksu Seo & Unchong Kim & Thi Nhu Quynh Phan & Thi Hai Hang Nguyen, 2022. "Air Transport Centrality as a Driver of Sustainable Regional Growth: A Case of Vietnam," Sustainability, MDPI, vol. 14(15), pages 1-14, August.
    5. Nicholas Sheard, 2015. "Airport Improvements and Urban Growth," Working Papers halshs-01117913, HAL.
    6. Luisa Doerr & Florian Dorn & Stefanie Gaebler & Niklas Potrafke, 2020. "How new airport infrastructure promotes tourism: evidence from a synthetic control approach in German regions," Regional Studies, Taylor & Francis Journals, vol. 54(10), pages 1402-1412, October.
    7. Pol Antràs & Stephen J. Redding & Esteban Rossi-Hansberg, 2023. "Globalization and Pandemics," American Economic Review, American Economic Association, vol. 113(4), pages 939-981, April.
    8. Carballo, Jerónimo & Graziano, Alejandro & Schaur, Georg & Volpe Martincus, Christian, 2016. "Endogenous Border Times," IDB Publications (Working Papers) 7685, Inter-American Development Bank.
    9. Bernardo, Valeria & Fageda, Xavier, 2019. "Globalization, long-haul flights and inter-city connections," Economics of Transportation, Elsevier, vol. 19(C), pages 1-1.
    10. Wu, Hanjun & Hong Tsui, Kan Wai & Ngo, Thanh & Lin, Yi-Hsin, 2020. "Impacts of aviation subsidies on regional wellbeing: Systematic review, meta-analysis and future research directions," Transport Policy, Elsevier, vol. 99(C), pages 215-239.
    11. Pol Antràs, 2020. "De-Globalisation? Global Value Chains in the Post-COVID-19 Age," NBER Working Papers 28115, National Bureau of Economic Research, Inc.
    12. Alfred Bauer & Florian Dorn & Luisa Dörr & Stefanie Gäbler & Manuela Krause & Martin Mosler & Christiaan Niemeijer & Horst Penzkofer & Niklas Potrafke, 2019. "Regional Economic Impact of Memmingen Airport on Tourism," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 100, July.
    13. Zhang, Yahua & Zhang, Anming & Zhu, Zhenran & Wang, Kun, 2017. "Connectivity at Chinese airports: The evolution and drivers," Transportation Research Part A: Policy and Practice, Elsevier, vol. 103(C), pages 490-508.
    14. Magazzino, Cosimo & Giolli, Lorenzo, 2021. "The relationship among railway networks, energy consumption, and real added value in Italy. Evidence form ARDL and Wavelet analysis," Research in Transportation Economics, Elsevier, vol. 90(C).
    15. Alderighi, Marco & Gaggero, Alberto A., 2017. "Fly and trade: Evidence from the Italian manufacturing industry," Economics of Transportation, Elsevier, vol. 9(C), pages 51-60.
    16. McGraw, Marquise J., 2020. "The role of airports in city employment growth, 1950–2010," Journal of Urban Economics, Elsevier, vol. 116(C).
    17. Martini, Gianmaria & Scotti, Davide & Viola, Domenico & Vittadini, Giorgio, 2020. "Persistent and temporary inefficiency in airport cost function: An application to Italy," Transportation Research Part A: Policy and Practice, Elsevier, vol. 132(C), pages 999-1019.
    18. Tveter, Eivind, 2017. "The effect of airports on regional development: Evidence from the construction of regional airports in Norway," Research in Transportation Economics, Elsevier, vol. 63(C), pages 50-58.
    19. Philipp Breidenbach, 2020. "Ready for take-off? The economic effects of regional airport expansions in Germany," Regional Studies, Taylor & Francis Journals, vol. 54(8), pages 1084-1097, July.
    20. Talebian, Ahmadreza & Zou, Bo & Hansen, Mark, 2018. "Assessing the impacts of state-supported rail services on local population and employment: A California case study," Transport Policy, Elsevier, vol. 63(C), pages 108-121.

    More about this item

    Keywords

    international direct flights; elasticity of substitution; face-to-face communication;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • R40 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_11364. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.