Air cargo as an impetus for economic growth through the channel of openness: The case of OECD countries

Against the backdrop of increased international market integration, an ever expanding openness in trade policy as well as a steep rise in the volume of air cargo, an empirical model is developed here to examine the relationships between openness in trade policy, air freight volume and per capita GDP. It uses Pedroni's panel cointegration test and the fully modified OLS techniques are employed for the sample consisting of OECD member countries during the 1970-2002 period. The empirical findings fully support cointegrated relationships among these variables, with positive trade and air freight shocks accounting for marked contributions to real per capita GDP. In addition, a panel Seemingly Unrelated Regression (hereafter SUR) estimation confirms that air cargo is indeed an engine that stimulates economic growth via the channel of openness. From the concrete evidence, important policy implications emerge for policymakers in our sample countries.