This paper reviews 96 studies on the economic impact of air transport, focusing on four key methodologies: input-output analysis, cost-benefit analysis (CBA), computable general equilibrium (CGE) models, and econometric techniques. Our findings show that input-output analysis and CGE models are best suited for studying the broad economic effects of air transport on the entire economy. Input-output analysis reveals that air transport creates jobs and economic value, with a stronger backward linkage—its effect on upstream industries—than a forward linkage. It also plays a key role in tourism, logistics, and freight. CBA and econometric methods are more effective for analyzing localized effects. The CBA literature indicates that airport expansion projects significantly increase social welfare. CGE models show that subsidies and taxes on air transport can benefit the economy by boosting government revenues, and that capacity expansions help both core and peripheral regions. Econometric studies confirm a positive link between air transport and various economic indicators, including GDP, employment, trade, and foreign direct investment. The methodologies themselves have advanced to overcome certain limitations. Input-output analysis has been extended with multi-period and multi-region models. CBA now uses alternative discounting techniques. CGE models have become more sophisticated with spatial and dynamic applications, and some even integrate air transport networks and game theory. Econometric techniques have adopted more robust models like heterogeneous time series cross section Granger causality, difference-in-difference, propensity score matching, seemingly unrelated regression and spatial econometrics to better address endogeneity. These advanced methods can provide a more robust approach for future research.
Kumar et al. (Thu,) studied this question.