Economic policy uncertainty and air travel demand: State-level evidence from the United States

This study provides state-level evidence from the United States on the relationship between economic policy uncertainty (EPU) and air travel demand. We construct a balanced state–month panel from 2006 to 2023 by combining state-level EPU indices with passenger flows departing from airports located in each state. Using a Poisson pseudo-maximum likelihood estimator with a log-link function, we find that higher EPU is associated with lower passenger flows. Several robustness checks support this finding. The heterogeneity analyses indicate that the association is more negative for domestic than for international passenger flows and at higher levels of COVID-19 policy stringency. Finally, an exploratory mediation analysis provides suggestive evidence that higher state unemployment may account for part of the association. Overall, the findings highlight the relevance of subnational variation in EPU for understanding air travel demand in the United States.