The impacts of airport activities on regional economy - An empirical analysis of New Zealand

Abstract

This study investigates the impacts of airport activities on regional economies using annual data on 22 regions and airports in New Zealand from 1996 to 2016. Studying all regions of an island country avoids the sample selection bias, and reduces the likelihood of incorrectly capturing the effects of improvements in other transport modes. The use of panel data over an extensive period of time also contributes to a robust identification procedure. In addition to the fixed effects estimation that has been frequently used in the literature, the system generalized methods of moments (GMM) approach and the dynamic common correlated effects (CCE) estimator are applied to account for cross-sectional dependence, cross-regional heterogeneity, and feedback effects. We find that airport activities have a statistically and economically significant impact on a region’s economy. This finding is robust across fixed effects, GMM, and CCE estimations, although more significant effects are identified by the less restrictive CCE approach. Our study suggests a positive effect of aviation on regional economies, and supports local/regional policies promoting aviation activities.