The impact of Airline Networks on Trade Flows: a natural experiment on causality applied to Italy

Efficient air transportation services can potentially boost regional economic development by allowing access to world market, facilitating integration and labor mobility, and fostering local industries. In this regard, aviation can act as a means of both transporting traded “goods” and providing complementary services of labor mobility. Lombardy is an interesting case to study since it is one of Europe's wealthiest and most industrialized regions with almost 10 million inhabitants. It has three of the top four Italian airports – namely Milan Malpensa (MXP), Bergamo Orio al Serio (BGY), and Milan Linate (LIN) – plus a smaller airport in Brescia Montichiari (VBS) mainly used for cargo flights. From 31st March 2008, Malpensa airport experienced the de-hubbing of former Italian flag carrier Alitalia. This allows to study the relation between international trade and civil aviation exploiting a quasi-natural experiment of the effects of an exogenous variation in air transportation, and to observed its effects without endogeneity problems. We investigate this relation by estimating a before/after econometric model applied to a panel dataset for the period 2004-2014 containing, for each the 28 European countries, data on trade flows divided by commodities sector, distance from Lombardy, GDP per capita, population, transport infrastructures and a set of other control variables. We provide evidence that civil aviation has a positive impact on international trade and that this effect is stronger in high-tech and medium-tech manufacturing sectors.