Gravity Models in Air Transport Research: A Survey and an Application

For more than 50 years, the gravity model has performed well in empirical studies on international trade flows. Its strong economic theoretical foundations have been acknowledged in the last 20 years. Its applications in air transport research remain relatively sparse. A review of the air transport literature employing gravity models in the last ten years shows that most of the studies have not accounted for the advances in empirical estimation techniques developed in international economics. We apply the gravity model in China’s aviation market using the Poisson pseudo-maximum likelihood (PPML) approach with fixed effects. The results indicate an enormous positive effect of the continuous liberalisation in the air transport sector in promoting the demand for air travel. The emergence of high-speed rail (HSR) has been a serious threat to China’s airline industry and could result in a significant reduction in the number of air passengers when given controls for other factors.

[1]  A. Sapir.  Trade benefits under the EEC generalized system of preferences , 1981 .

[2]  Cherng-Chwan Hwang,et al.  Analyzing air cargo flows of international routes: an empirical study of Taiwan Taoyuan International Airport , 2011 .

[3]  Steven Brakman,et al.  The Gravity Model in International Trade: Advances And Applications , 2014 .

[4]  Scott L. Baier,et al.  Bonus vetus OLS: A simple method for approximating international trade-cost effects using the gravity equation , 2009 .

[5]  Yahua Zhang,et al.  Determinants of Air Passenger Flows in China and Gravity Model: Deregulation, LCC and High Speed Rail , 2016 .

[6]  J. Bergstrand,et al.  Do Free Trade Agreements Actually Increase Members' International Trade? , 2005 .

[7]  Scott L. Baier,et al.  The growth of world trade: tariffs, transport costs, and income similarity , 2001 .

[8]  Hidenobu Matsumoto,et al.  International air network structures and air traffic density of world cities , 2007 .

[9]  Asun Galera,et al.  Effect of low-cost airlines on tourism in Spain. A dynamic panel data model , 2011 .

[10]  Hidenobu Matsumoto.  INTERNATIONAL URBAN SYSTEMS AND AIR PASSENGER AND CARGO FLOWS: SOME CALCULATIONS , 2004 .

[11]  R. Feenstra.  Advanced international trade : theory and evidence , 2004 .

[12]  Tim Hazledine.  Searching for the sweet spot: The determinants of direct services from Canadian airports , 2014 .

[13]  Tim Hazledine,et al.  Border effects for domestic and international Canadian passenger air travel , 2009 .

[14]  James E. Anderson.  A Theoretical Foundation for the Gravity Equation , 1979 .

[15]  A. Mattoo,et al.  Open Skies Over the Middle East , 2014 .

[16]  Ben Shepherd,et al.  Air cargo transport in APEC: Regulation and effects on merchandise trade , 2011 .

[17]  Yahua Zhang,et al.  Low Cost Carriers in China and its Contribution to Passenger Traffic Flow , 2013 .

[18]  N. Hubbard,et al.  The impact of Air Service Agreement liberalisation: The case of Nigeria , 2014 .

[19]  Faqin Lin.  Are distance effects really a puzzle , 2013 .

[20]  John Mccallum,et al.  National Borders Matter: Canada-U.S. Regional Trade Patterns , 1995 .

[21]  James E. Anderson,et al.  Gravity with Gravitas: A Solution to the Border Puzzle , 2001 .

[22]  J. Bergstrand.  The Generalized Gravity Equation, Monopolistic Competition, and the Factor-Proportions Theory in International Trade , 1989 .

[23]  E. Helpman,et al.  ESTIMATING TRADE FLOWS : TRADING PARTNERS AND TRADING VOLUMES Elhanan Helpman , 2007 .

[24]  M. G. Grosso,et al.  Air Passenger Transport In The APEC: Regulatory Impacts and Prospects for , 2012 .

[25]  Yuichiro Yoshida,et al.  Airlines’ reaction to high-speed rail entries: Empirical study of the Northeast Asian market , 2016 .

[26]  Qiang Wang,et al.  Market power and its determinants in the Chinese airline industry , 2013 .

[27]  Katsuhiro Yamaguchi.  International trade and air cargo: Analysis of US export and air transport policy , 2008 .

[29]  J. Bergstrand.  The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence , 1985 .

[30]  Alberto Behar,et al.  Trade Flows, Multilateral Resistance, and Firm Heterogeneity , 2012, Review of Economics and Statistics.

[31]  T. Mayer,et al.  Gravity Equations: Workhorse, Toolkit, and Cookbook , 2013 .

[32]  Li-Yen Chang.  International air passenger flows between pairs of APEC countries: A non-parametric regression tree approach , 2012 .

[33]  K. Head,et al.  The Puzzling Persistence of the Distance Effect on Bilateral Trade , 2004, The Review of Economics and Statistics.

[34]  Franz Rothlauf,et al.  Gravity models for airline passenger volume estimation , 2007 .

[35]  Anming Zhang,et al.  Issues on liberalization of air cargo services in international aviation , 2002 .

[36]  Anming Zhang,et al.  Airline Network Choice and Market Coverage Under High-Speed Rail Competition , 2015 .

[37]  John A. Sawyer,et al.  An econometric study of international trade flows , 1967 .

[38]  Renato Redondi,et al.  The role of the air transport service in interregional long-distance students’ mobility in Italy , 2016 .

[39]  Anming Zhang,et al.  Effects of Air and High-Speed Rail Transport Integration on Profits and Welfare: The Case of Air-Rail Connecting Time , 2016 .

[40]  Edward J. Balistreri,et al.  Structural Estimation and the Border Puzzle , 2004 .

[41]  Silvana Tenreyro,et al.  The Log of Gravity , 2004, The Review of Economics and Statistics.

[42]  Gianmaria Martini,et al.  Connecting African urban areas: airline networks and intra-Sub-Saharan trade , 2015 .

[43]  J. Tinbergen.  Shaping the World Economy: Suggestions for an International Economic Policy , 1964 .

[44]  Li-Yen Chang,et al.  Analysis of bilateral air passenger flows: A non-parametric multivariate adaptive regression spline approach , 2014 .

[45]  M. Fung,et al.  Analysing passenger network changes: The case of Hong Kong , 2015, Journal of Air Transport Management.

[46]  Jonathan Eaton,et al.  Technology, Geography, and Trade , 2002 .

[47]  David K. Round,et al.  China's airline deregulation since 1997 and the driving forces behind the 2002 airline consolidations , 2008 .