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The role of airports in city employment growth

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Marquise McGraw discusses the relationship between airports and employment.

Image courtesy of interviewee. March 25, 2024

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This video video discusses the relationship between transportation infrastructure, particularly aviation, and economic development. It references significant research studies that evaluated the impact of transportation systems, starting from the interstate highway system to aviation, on economic growth and job creation. The author notes that air service can attract economic development and innovation and emphasizes the importance of connectivity in a globalized economy.

Historically, the development of the U.S. aviation system began with the air mail service, which was influenced by the desire to expedite communication and, subsequently, foster a commercial aviation sector. The author cites various studies from different years that have investigated how the quality and presence of air service relate to factors like population and employment growth.

The author conducted their own research, analyzing data from 1950 to 2010, which found that airports had a measurable positive impact, resulting in notable increases in employment, population, and income. An average airport contributed approximately $77 million in economic output, justifying significant investments in transportation infrastructure.

In conclusion, the author argues that while the findings underscore the importance of aviation, they also point to a broader implication that investments in transportation infrastructure can yield economic growth. This video video advocates for ensuring adequate air service to various regions and suggests that new technologies and innovative transport methods could further enhance economic benefits.

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X-TIMESTAMP-MAP:LOCAL=00:00:00.000,MPEGTS=900000

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Thinking about the role of transportation infrastructure

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in economic development, broadly speaking.

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So, you know, there were, in the early,

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around 2007, I believe it was Nate Baum Snow,

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who had a very impactful paper looking at the impact

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of the interstate highway system on just sort

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of general commerce and, and growth and other factors.

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And that got me thinking about the aviation system

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as a possible catalyst for doing that.

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Um, we often hear politicians

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and local leaders talk about jobs

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and, you know, the importance of having connections to the,

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to outside industries.

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And, as we become a more globalized nation, you know,

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thinking about how to facilitate those connections.

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And so there, in addition to Nate's paper,

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I was also inspired by another paper by, Jeremy atac

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and, and others who took a look at the, the railroads

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and, you know, sort of looked at how

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location on the railroads historically, to,

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opportunities for information exchange

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and economic development.

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So of course, aviation is sort of, right now I would think

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of it as like one of our most modern

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forms of transportation.

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And so really in that spirit of just answering

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that question, you know,

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does air service attract economic development?

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Does this attract economic opportunity?

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Is this a conduit for innovation, of different sorts?

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I, you know, so I got very into this topic

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and I'm happy to talk a little more

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about the history and all of that.

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I unearthed in researching this.

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So I think, John Bruckner, Richard Green, those are,

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so, Breck newspapers in 2003, greens was in 2007.

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Those are two of the, I consider, you know,

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seminal papers in this area, really trying

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to understand this relationship between air service, the,

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the quality of air service and economic development factors.

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Now, particularly looking at population employment tends

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to be main variables that we want to consider

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as proxies for that.

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And, you know, these were, you know, fascinating papers

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that, you know, that had good data that, you know,

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are asking very interesting question.

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Uh, I think you could, you know, reasonably ask,

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you know, some questions, you know,

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just about the endogeneity, is it the air service

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that brings these, developments

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or is it the development, you know,

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that brings the air service?

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And I think in reality it's a mix of both of these factors.

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And so I, you know, from that particular context, I wanted

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to try to see if I could come up with a research design

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for looking at this question that could be, you know,

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slightly more, you know, considered slightly more causal in

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a sense, you know, understanding that link between service

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and development or having an airport

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and then that population outcome.

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But again, you know, fully acknowledging that it's possible

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that this can go in both ways too. So to

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Do that, I started sort of just stumbled upon this,

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but you know, thinking about the history of the development

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of the aviation system in the United States,

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and I learned about the air mail system,

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and I learned that this was actually the first,

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this was the genesis of the system,

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the national aviation system

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that we have here in the United States today,

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post office officials, was

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that if they could speed mail delivery from, you know,

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five days to four days to three days by flying, say piece

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of mail that's going from LA to New York City,

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if we could fly for part of the distance

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and then, you know, put it on a railroad for perfect

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to distance, you could speed up the delivery

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and then of course you could charge more, right?

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So you had, the air service kind of start

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because the post office department wanted

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to innovate and wanted to be faster.

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And so they developed a set of beacons to, you know,

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have planes, being able to navigate across, you know,

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sort of the first air, air mail roots.

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And, at the same time, the Air Force,

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the Army Air Service was very interested in aviation,

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for, you know, national security reasons

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and sort of developing that, you know,

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also providing space for, folks to be able to train so

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that they could train their pilots

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and, you know, get them ready, for battle.

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And so there was also some local level lobbying

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that was going on there, you know, different cities.

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Some cities saw the potential for aviation to, you know,

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do more than just, you know, be, you know, conduit for,

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you know, military operations or post office.

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And so in fact, as the air mail service already developed,

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these pilots who were flying the mail also figured out

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as the planes got bigger and more powerful,

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that you could fly people too.

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And so, you know, that got us started

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with the commercial aviation side of this.

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And so these airlines

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and these companies that we know today, you know,

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for example, Boeing, United Airlines,

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they got their start in this era of the 1930s.

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And so from the econometric perspective, this was sort

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of gold because, you know, it sort

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of certainly correlated literally with the development

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of the aviation system,

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but, you know, uncorrelated with what's gonna happen,

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you know, otherwise in, you know,

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the years I was looking at, you know, 1950, 1980s, you know,

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the two thousands, because we're so far away in time.

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Um, and so, you know, just made for a really perfect way

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to conceptualize the study.

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And then I also used

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that history in building out the synthetic control framework

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that, that you see in the paper where, so I was able

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to match, for example, on those, these air rail cities

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and those Army air service cities,

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because those were gonna have a bit

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of a headstart in the aviation sector.

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And those were, some of those cities were random,

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but others were, part of government plans.

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And so, that also

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provided, you know, some variation that, you know,

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I could use here and exploit.

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So really for this paper, the history

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Is what drove the selection of those variables,

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that I was able to use as part of my modeling.

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And, and then I was able to develop results

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that I felt were, credibly, causal, if you will.

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So the dataset, so going back to

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that historical conversation, a lot of this dataset,

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was data that had not been digitized ever before.

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So the Army Air mail service sy system, for example,

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so I found in, sort of a research annex library at uc,

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Berkeley, one of these, an old book that,

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that had these maps.

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And so these maps were, digitized

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and we did some of that using GIS software

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and like others sort of coding using, you know,

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coordinates and other methods.

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But, you know, so that had to be digitized.

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These Army Air Service cities, they had

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to be, digitized.

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The national airport plan, you know, had to be digitized.

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And so a combination of

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that newly digitized data plus just our traditional metrics

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of employment, so, you know, population data.

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So I use data from the US census, to try

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to get a little more at, you know,

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can we say anything about state

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or local level, GDP, you know, it also took a lot

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of information from the county, business patterns also,

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you know, developed by the census

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and then, merged that with data from the Bureau

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of Economic Analysis, where they looked at,

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they looked at personal income per capita income,

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other measures of local level, economic development.

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And so all of this was merged into a panel dataset,

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on a Dec Cato basis.

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So the dataset basically went from 1950 through to 2010.

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Everything was done on a 10 year basis.

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Um, and that was,

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that was the data that was used in the study.

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We definitely found these results that I was looking for.

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So I, I had a hunch

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that we were gonna see some growth in employment

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and population that could be due to the airport.

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So I found a 3.9% growth in total employment

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and a 3.4% growth in population over the study period

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of 1950 to 2010.

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So that's sort of an average growth rate over

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that 60 year period, per decade.

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You know, that's sizable. And, you know, looking at some

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of the other metrics, looking at per capita personal income,

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for example, I saw 3% growth in that,

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2% growth in earnings.

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So, you know, again, we're talking about real money,

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doing some back of the envelope calculations in terms

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of jobs created.

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Just consider a, the average airport in the study, you know,

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that average airport is gonna create something almost of,

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you know, like a thousand jobs.

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You know, some of those will of course be the jobs

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directly at the airport, all your ramp personnel,

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your maintenance personnel, you know, food service,

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all the things that keep an airport running.

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But then a lot of that is also going to be jobs,

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and employers who are reliant on that air service

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and they see that this is going to lower their cost

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of doing business to locate closer to the airport

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so they locate closer.

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And then you get jobs, you know, sort

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of in this vicinity of this airport.

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Um, this, CASARA

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and others have talked about this idea of the Aerotropolis,

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you know, you know, coming out of this

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where the airport really sort of becomes that focal point

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and also many city in and of itself,

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and by the way, it should also, you know,

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put these in dollar amounts.

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So I was able to, you know, again,

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do some dollar amounts in terms

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of the return on investment, if you will.

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So, and you know, I found

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that the average airport in this study over this, you know,

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60 year period was probably responsible

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for something like $77 million of,

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you know, economic output.

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So you, if it, you know, costs 200 million to, you know,

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kind of create an airport

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and to build an airport, for example,

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I'm just making up that number.

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Uh, but you can get your return on investment, you know,

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only within a couple of decades, you know, and,

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and so that was it, and maybe faster.

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And so that was sort of really interesting.

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Now the question is what can we do with this?

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Because so much of this was linked to the history

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of the system, and there were so many benefits, you know,

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in terms of like first mover advantages.

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And so for example, I mentioned the early airlines, like,

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you know, United Airlines, you know,

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which is still with us today.

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Um, the early airlines that were able to get a start,

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you know, tended to be more successful.

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The cities that were the first to, you know, get,

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claim their airport, you know, sort

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of claim their space on the map, they were able to

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probably reap, generally reap the benefits, more

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of the economic development.

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Nowadays, if we build an airport and

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or if we, you know, work to attract more service

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to a small city airport,

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that can still lead to some development.

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But I also, saw my data set

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and then my analysis that there's a lot of synergy.

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So there is a, a element of just, you know, sort

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of being in the right place at the right time,

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or being the right type of city, being a capital city

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for example, or being a city, that has a university

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or other industry that, you know,

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has a high degree of innovation.

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Because at the end of the day, you know,

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speaking towards the mechanisms of these findings, again,

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this is speculation.

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I can't, you know, prove this,

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but I think what, what's happening is this transmission

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of ideas and this transmission of ideas, you know, leading

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to better products, both, in the airport city

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and possibly, and most likely in other places as well.

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So it's this connectivity, especially in the days, you know,

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before, you know, we just hop on Zoom, that was sort

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of commonplace, bringing people together.

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And I would argue even in the world where we have zoom

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and video conferencing, there's still something

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that's really important about the face-to-face connection

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and face-to-face communication.

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And just being able to, you know, have that human touch,

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if you will, leading to business deals leading

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to information being shared.

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And, you know, the more information

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that's shared in these innovative industries,

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consulting, for example,

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Banking, finance, the better outcomes they're gonna have.

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And that's, again, very similar to the railroads paper

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that I linked to earlier, where again, if you were closer to

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the railroad back in the day, you,

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your banks had better banking outcomes.

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And, you know, part of that was just the information

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and the information flowing from one place to another.

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And so I think this is very much a modern equivalent of

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that, you know, just bringing people together,

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for business purposes, also for tourism, of course.

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And, you know, this just makes everything better

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and makes us all stronger and

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therefore, you know, gives us more, more

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of a boost in our economy in terms of what

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to do with this conclusions.

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I don't think the answer is, you know, go out

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and build, you know, too many more airports.

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I think, I think the implication is more something a a

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little more general than that, which is investments in

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transportation infrastructure can yield economic growth.

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So today that would be more of a question of, you know,

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can we make sure that we have the

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right service to the right places?

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So there, you know, for example, there may be an argument

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for, you know, some government intervention in, you know,

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you know, some small cities

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or, you know, some help to, you know, get the service

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to those places, so that they could have it.

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I think though, you know, most likely what's going

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to happen is there's going

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to be at some point another revolution in transportation

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infrastructure in how we get around.

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Um, there's always talk of, you know, electric vehicles

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and electric airplanes

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and cars that are gonna drive themselves

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and, you know, ideas, you know, like the hyperloop

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and you know, other things, maglev trains.

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I think, you know, there are all these technologies out

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there, some of which have been proven,

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some of which have not.

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I think, you know, this is sort of a blueprint for if,

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you know, we, you know, land on the right technology

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and if it makes sense, for the environments

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that we're talking about,

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we can expect some of these effects.

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And I think this makes a case that it is worth, you know,

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considering, you know, sort of what's next

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and thinking about that, what's next?

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And you know, just preparing for preparing for that.

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I think this is a preview of what could happen, you know,

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in such a scenario, but certainly

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let's maintain what we have.

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It's certainly worth every dollar putting into our aviation

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system, our air traffic control, you know,

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making sure the airlines are, are strong, making sure

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that air service is accessible to as many people

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as possible, making sure that the rest

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of our transportation infrastructure

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is working together with that.

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So that's our roads and our high speed rail.

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You know, for example, I love seeing

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that we're finally in the United States working to bring

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rail connections to more airports.

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So, you know, here in the Washington DC area

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where I'm based, the Silver Line,

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up the Washington Metro, opened up about a year

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or so ago connecting finally after 60 years

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or so, you know, connecting Washington Dallas International

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Airport to, you know, downtown Washington, dc.

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And so things like that I think are going to continue

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to build on this

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and to build on the results that we've seen in this paper.

00:00 - Thinking about the role of transportation infrastructure in economic development, broadly speaking. So, you know, there were, in the early, around 2007, I believe it was Nate Baum Snow, who had a very impactful paper looking at the impact of the interstate highway system on just sort

00:21 - of general commerce and, and growth and other factors. And that got me thinking about the aviation system as a possible catalyst for doing that. we often hear politicians and local leaders talk about jobs and, you know, the importance of having connections to the, to outside industries. And, as we become a more globalized nation, you know, thinking about how to facilitate those connections. And so there, in addition to Nate's paper,

00:52 - I was also inspired by another paper by, Jeremy atac and, and others who took a look at the, the railroads and, you know, sort of looked at how location on the railroads historically, to, opportunities for information exchange and economic development. So of course, aviation is sort of, right now I would think of it as like one of our most modern forms of transportation. And so really in that spirit of just answering

01:20 - that question, you know, does air service attract economic development? Does this attract economic opportunity? Is this a conduit for innovation, of different sorts? I, you know, so I got very into this topic and I'm happy to talk a little more about the history and all of that. I unearthed in researching this. So I think, John Bruckner, Richard Green, those are, so, Breck newspapers in 2003, greens was in 2007.

01:46 - Those are two of the, I consider, you know, seminal papers in this area, really trying to understand this relationship between air service, the, the quality of air service and economic development factors. Now, particularly looking at population employment tends to be main variables that we want to consider as proxies for that. And, you know, these were, you know, fascinating papers that, you know, that had good data that, you know, are asking very interesting question.

02:15 - I think you could, you know, reasonably ask, you know, some questions, you know, just about the endogeneity, is it the air service that brings these, developments or is it the development, you know, that brings the air service? And I think in reality it's a mix of both of these factors. And so I, you know, from that particular context, I wanted to try to see if I could come up with a research design for looking at this question that could be, you know,

02:42 - slightly more, you know, considered slightly more causal in a sense, you know, understanding that link between service and development or having an airport and then that population outcome. But again, you know, fully acknowledging that it's possible that this can go in both ways too. So to Do that, I started sort of just stumbled upon this, but you know, thinking about the history of the development of the aviation system in the United States, and I learned about the air mail system,

03:12 - and I learned that this was actually the first, this was the genesis of the system, the national aviation system that we have here in the United States today, post office officials, was that if they could speed mail delivery from, you know, five days to four days to three days by flying, say piece of mail that's going from LA to New York City, if we could fly for part of the distance and then, you know, put it on a railroad for perfect

03:35 - to distance, you could speed up the delivery and then of course you could charge more, right? So you had, the air service kind of start because the post office department wanted to innovate and wanted to be faster. And so they developed a set of beacons to, you know, have planes, being able to navigate across, you know, sort of the first air, air mail roots. And, at the same time, the Air Force, the Army Air Service was very interested in aviation,

04:03 - for, you know, national security reasons and sort of developing that, you know, also providing space for, folks to be able to train so that they could train their pilots and, you know, get them ready, for battle. And so there was also some local level lobbying that was going on there, you know, different cities. Some cities saw the potential for aviation to, you know, do more than just, you know, be, you know, conduit for, you know, military operations or post office.

04:30 - And so in fact, as the air mail service already developed, these pilots who were flying the mail also figured out as the planes got bigger and more powerful, that you could fly people too. And so, you know, that got us started with the commercial aviation side of this. And so these airlines and these companies that we know today, you know, for example, Boeing, United Airlines, they got their start in this era of the 1930s.

04:56 - And so from the econometric perspective, this was sort of gold because, you know, it sort of certainly correlated literally with the development of the aviation system, but, you know, uncorrelated with what's gonna happen, you know, otherwise in, you know, the years I was looking at, you know, 1950, 1980s, you know, the two thousands, because we're so far away in time. and so, you know, just made for a really perfect way to conceptualize the study.

05:25 - And then I also used that history in building out the synthetic control framework that, that you see in the paper where, so I was able to match, for example, on those, these air rail cities and those Army air service cities, because those were gonna have a bit of a headstart in the aviation sector. And those were, some of those cities were random, but others were, part of government plans. And so, that also

05:50 - provided, you know, some variation that, you know, I could use here and exploit. So really for this paper, the history Is what drove the selection of those variables, that I was able to use as part of my modeling. And, and then I was able to develop results that I felt were, credibly, causal, if you will. So the dataset, so going back to that historical conversation, a lot of this dataset, was data that had not been digitized ever before.

06:18 - So the Army Air mail service sy system, for example, so I found in, sort of a research annex library at uc, Berkeley, one of these, an old book that, that had these maps. And so these maps were, digitized and we did some of that using GIS software and like others sort of coding using, you know, coordinates and other methods. But, you know, so that had to be digitized. These Army Air Service cities, they had

06:44 - to be, digitized. The national airport plan, you know, had to be digitized. And so a combination of that newly digitized data plus just our traditional metrics of employment, so, you know, population data. So I use data from the US census, to try to get a little more at, you know, can we say anything about state or local level, GDP, you know, it also took a lot of information from the county, business patterns also,

07:09 - you know, developed by the census and then, merged that with data from the Bureau of Economic Analysis, where they looked at, they looked at personal income per capita income, other measures of local level, economic development. And so all of this was merged into a panel dataset, on a Dec Cato basis. So the dataset basically went from 1950 through to 2010. Everything was done on a 10 year basis. and that was,

07:36 - that was the data that was used in the study. We definitely found these results that I was looking for. So I, I had a hunch that we were gonna see some growth in employment and population that could be due to the airport. So I found a 3.9% growth in total employment and a 3.4% growth in population over the study period of 1950 to 2010. So that's sort of an average growth rate over that 60 year period, per decade.

08:03 - You know, that's sizable. And, you know, looking at some of the other metrics, looking at per capita personal income, for example, I saw 3% growth in that, 2% growth in earnings. So, you know, again, we're talking about real money, doing some back of the envelope calculations in terms of jobs created. Just consider a, the average airport in the study, you know, that average airport is gonna create something almost of, you know, like a thousand jobs.

08:31 - You know, some of those will of course be the jobs directly at the airport, all your ramp personnel, your maintenance personnel, you know, food service, all the things that keep an airport running. But then a lot of that is also going to be jobs, and employers who are reliant on that air service and they see that this is going to lower their cost of doing business to locate closer to the airport so they locate closer. And then you get jobs, you know, sort

08:57 - of in this vicinity of this airport. this, CASARA and others have talked about this idea of the Aerotropolis, you know, you know, coming out of this where the airport really sort of becomes that focal point and also many city in and of itself, and by the way, it should also, you know, put these in dollar amounts. So I was able to, you know, again, do some dollar amounts in terms

09:19 - of the return on investment, if you will. So, and you know, I found that the average airport in this study over this, you know, 60 year period was probably responsible for something like $77 million of, you know, economic output. So you, if it, you know, costs 200 million to, you know, kind of create an airport and to build an airport, for example, I'm just making up that number.

09:43 - but you can get your return on investment, you know, only within a couple of decades, you know, and, and so that was it, and maybe faster. And so that was sort of really interesting. Now the question is what can we do with this? Because so much of this was linked to the history of the system, and there were so many benefits, you know, in terms of like first mover advantages. And so for example, I mentioned the early airlines, like, you know, United Airlines, you know,

10:07 - which is still with us today. the early airlines that were able to get a start, you know, tended to be more successful. The cities that were the first to, you know, get, claim their airport, you know, sort of claim their space on the map, they were able to probably reap, generally reap the benefits, more of the economic development. Nowadays, if we build an airport and or if we, you know, work to attract more service

10:33 - to a small city airport, that can still lead to some development. But I also, saw my data set and then my analysis that there's a lot of synergy. So there is a, a element of just, you know, sort of being in the right place at the right time, or being the right type of city, being a capital city for example, or being a city, that has a university or other industry that, you know, has a high degree of innovation.

10:58 - Because at the end of the day, you know, speaking towards the mechanisms of these findings, again, this is speculation. I can't, you know, prove this, but I think what, what's happening is this transmission of ideas and this transmission of ideas, you know, leading to better products, both, in the airport city and possibly, and most likely in other places as well. So it's this connectivity, especially in the days, you know, before, you know, we just hop on Zoom, that was sort

11:26 - of commonplace, bringing people together. And I would argue even in the world where we have zoom and video conferencing, there's still something that's really important about the face-to-face connection and face-to-face communication. And just being able to, you know, have that human touch, if you will, leading to business deals leading to information being shared. And, you know, the more information that's shared in these innovative industries,

11:51 - consulting, for example, Banking, finance, the better outcomes they're gonna have. And that's, again, very similar to the railroads paper that I linked to earlier, where again, if you were closer to the railroad back in the day, you, your banks had better banking outcomes. And, you know, part of that was just the information and the information flowing from one place to another. And so I think this is very much a modern equivalent of that, you know, just bringing people together,

12:21 - for business purposes, also for tourism, of course. And, you know, this just makes everything better and makes us all stronger and therefore, you know, gives us more, more of a boost in our economy in terms of what to do with this conclusions. I don't think the answer is, you know, go out and build, you know, too many more airports. I think, I think the implication is more something a a little more general than that, which is investments in

12:47 - transportation infrastructure can yield economic growth. So today that would be more of a question of, you know, can we make sure that we have the right service to the right places? So there, you know, for example, there may be an argument for, you know, some government intervention in, you know, you know, some small cities or, you know, some help to, you know, get the service to those places, so that they could have it. I think though, you know, most likely what's going

13:10 - to happen is there's going to be at some point another revolution in transportation infrastructure in how we get around. there's always talk of, you know, electric vehicles and electric airplanes and cars that are gonna drive themselves and, you know, ideas, you know, like the hyperloop and you know, other things, maglev trains. I think, you know, there are all these technologies out there, some of which have been proven,

13:35 - some of which have not. I think, you know, this is sort of a blueprint for if, you know, we, you know, land on the right technology and if it makes sense, for the environments that we're talking about, we can expect some of these effects. And I think this makes a case that it is worth, you know, considering, you know, sort of what's next and thinking about that, what's next? And you know, just preparing for preparing for that.

13:57 - I think this is a preview of what could happen, you know, in such a scenario, but certainly let's maintain what we have. It's certainly worth every dollar putting into our aviation system, our air traffic control, you know, making sure the airlines are, are strong, making sure that air service is accessible to as many people as possible, making sure that the rest of our transportation infrastructure is working together with that.

14:19 - So that's our roads and our high speed rail. You know, for example, I love seeing that we're finally in the United States working to bring rail connections to more airports. So, you know, here in the Washington DC area where I'm based, the Silver Line, up the Washington Metro, opened up about a year or so ago connecting finally after 60 years or so, you know, connecting Washington Dallas International Airport to, you know, downtown Washington, dc.

14:49 - And so things like that I think are going to continue to build on this and to build on the results that we've seen in this paper.

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