All Roads Lead to Rome: Global Air Connectivity and Bilateral Trade

This replication package accompanies the paper "All Roads Lead to Rome: Global Air Connectivity and Bilateral Trade" by Zheng Wang, Feicheng Wang, and Zhuo Zhou. The study investigates how international air connectivity, by facilitating face-to-face interactions, impacts bilateral trade flows between countries. Utilizing a novel instrumental variable strategy based on exogenous variations in air connectivity through third-country transit hubs, this study analyzes itinerary-level global air passenger data from nearly all international scheduled flights between 2013 and 2018. The primary objective is to estimate the causal effect of improved air connectivity on trade, emphasizing differences across industries that require varying levels of relationship-specific investment and information exchange. The study demonstrates that enhanced air connectivity significantly boosts international trade, with particularly pronounced effects in industries that heavily rely on contract-intensive interactions and in the trade of new products. Additionally, the study examines how online communications may partially substitute in-person interactions, revealing nuanced complementarities and substitutive effects in facilitating international business transactions.