Gravity and cultural proximity: evidence from air traffic

This paper explores the importance of cultural proximity for economic exchange in the context of air travel. We estimate a structurally founded gravity model of international aviation passenger traffic. We exploit geographic variation in the population cultural makeup at the U.S. metropolitan statistical area (MSA) level to construct cultural proximity indices based on shared language, ethnicity and religion between U.S. MSA-s and the rest of the world. We estimate a two stage model to account for selection into operating a route. We find that cultural proximity significantly increases the probability of a route being operated as well as the passenger volumes on existing routes. A one standard deviation increase in shared ethnicity increases passenger flows by 37% and shared language- by 26%. The paper provides clear evidence that accounting for cultural proximity is essential in modelling international air travel in addition to geographic distance. The paper contributes to the literature on service trade flows as well as the literature on the cultural and historical roots of trade.