Economic Impact of Air Transport across Varying Income Levels

Abstract: This study investigates the short-term relationship between air transport, including air transport passengers and air cargo volume, and economic performance using a panel dataset of 70 countries categorized into high-income, upper-middle-income, and lower-middle-income groups over the period from 1980 to 2021. To test for causality, the Dumitrescu and Hurlin (DH) panel causality tests were applied across the country groups. The results reveal significant short-term causality from air transport passengers to GDP per capita, particularly in high- and upper-middle-income countries, suggesting that growth in air passenger traffic contributes to economic development in these regions. However, the findings show no evidence of a causal relationship between air cargo volume and GDP per capita, contrasting with previous studies that found air cargo to be a driver of economic performance. These findings provide valuable insights for policymakers and investors, emphasizing the potential of air passenger transport to stimulate short-term economic growth, while air cargo may not have a substantial impact in the short run. Consequently, resource allocation and policy strategies should be tailored to specific aspects of the aviation industry to maximize economic benefits. Keywords: Air Transport, Aviation Industry, GDP Per Capita, Panel Data Analysis, Dumitrescu and Hurlin (DH) causality test JEL Classification Number: F63, L93