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

Using itinerary-level global air traffic data, this paper proposes a novel instrumental variable to estimate the effect of in-person interactions on bilateral trade. By exploiting exogenous variations in air connectivity that are driven by third-country connecting capacities, we show that increased air connections boost trade, especially for complex industries and new products. Online interactions appear to be a limited substitute for in-person contact. These findings confirm the role of in-person communications in reducing information-sharing barriers. Our estimation approach also provides a useful tool for evaluating the social and economic impacts of a complex transport network. (JEL D83, F14, L93, R41)