US research says claims airports are a city’s “economic engine” are overstated, especially compared to other local infrastructure

An Associate Professor at the University of Illinois, Julie Cidell, has investigated some of the claims made by airports, in the US in particular, that they are important drivers of the economy. And she is not persuaded that any better than other major bits of infrastructure. Julie has looked at  the 25 largest US airports, and their benefits, compared to the costs – the latter being very high for airports. Often economic benefits accrue to areas distant from the airport, so those suffering the noise, pollution and traffic congestion get little advantage, but huge disadvantage.  She also finds that airports tend to have other economic activity around them, but that is not necessarily connected directly to the airport. Correlation and causation are different. Often the jobs in the vicinity of an airport are due to nearby industry, and good transport links – not due to air travel. Jobs could just as easily be created by these other sectors, causing far less negative local impact, let alone carbon emissions. While for some regional airports, an air link may bring economic growth – for major cities, it is the other way round.
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Claims that airports are a city’s “economic engine” are overstated, especially when compared to other local infrastructure.

4.11.2014 (LSE)

By Professor Julie Cidell (USA)

Airports are a key part of our globalized world, and calls for their expansion and development are becoming increasingly common. But airports can have negative effects on their local areas– air and noise pollution, and traffic congestion. Do airports’ benefits outweigh their costs to local areas? In new research that examines the 25 largest airports in the U.S., Julie Cidell finds that while airports may drive economic activity within a region, more often than not, that activity is occurring outside the vicinity of the airport. She writes that aspects of an airport’s location, such as nearby industry and transport links often serve as job creators, rather than the airport itself.

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It is rare to find an article or report about a major US airport that doesn’t describe it as the “economic engine” of its metropolitan region (see Figure 1). Indeed, there are many studies that indicate a positive connection between increasing air traffic capacity or air traffic and the number of firms in a region. Such studies are commonly used to justify airport expansion and the development of an “aerotropolis” or “airport city” through increasing the airport footprint and/or building new runways and terminals, under the logic that the region as a whole will benefit from the expansion. However, breaking down the connection between transportation and economic development across time and/or space can lead to different results. For example, in peripheral European regions, the causality arrow goes from air traffic to economic development, but in core cities, it’s the other way around. [This is the same conclusion as a 2013 CE Delft report – see link]. 

We know that the negative effects of airports—air pollution, noise pollution, labor competition, and traffic congestion—occur at a local scale, within 5-6 miles of the airport boundary.

While the argument is often made that “you knew there was an airport there when you moved,” that argument is usually wrong for two reasons:

a) many airport-adjacent neighborhoods predate jet aircraft, and

b) despite their vast, fixed infrastructure, airports move.

For example, a study of Phoenix concluded that it was the airport and its disamenities that moved into residential neighborhoods, not the other way around. Nevertheless, very few studies of the air transportation-economic development relationship are broken down at finer scales to enable an equitable comparison to the negative effects of airports.

That was the purpose of my recent study. I focused on the largest 25 airports in the US and carried out two different kinds of spatial analyses as described below. For both, I found that more often than not, the economic development an airport brings to its region is not only equally spatially clustered as the negative environmental effects, but that development is occurring somewhere other than the vicinity of the airport.

In other words, airport neighbors are not sacrificing for the good of the region as a whole, but for other neighborhoods equivalent in size to their own, raising questions of spatial equity regarding facilities that draw on a great deal of government money and yet are not producing benefits region-wide.

Airports as urban infrastructure

Previous studies have argued that airports are significant job generators using a simple methodology: drawing circles of 2.5, 5, and 10 mile radii around the airport, counting the number of jobs within, and comparing that number to the central business district (CBD). I used the same methodology to draw rings around two major pieces of infrastructure found in every US metropolitan area: the largest shopping mall and the largest wastewater treatment plant. I also chose the point in the metropolitan area directly opposite from the airport across the CBD to act as a control. I then compared those numbers to the jobs in the CBD (all data were taken from the 2007 US Economic Census), with the results in Figure 2, below.

Surprisingly, at all distances studied, a wastewater treatment plant is a more important “job generator” than the airport. Is a wastewater treatment plant therefore the “economic engine” of its region? Such a facility generates relatively few jobs, either directly or indirectly. Presumably, this finding does not have to do with the characteristics of the plant itself as a job generator, but with its surroundings. Such plants are often located on major waterways and can be considered a locally unwanted land use much as the airport. For both these reasons, they are likely to be surrounded by industrial land rather than residential. Similarly, of course, one could argue that it is not the airport qua airport that is generating jobs, but rather other features of its immediate location such as ground transportation access—features which potentially could be reproduced in other locations without the hazards of noise and air pollution.

Regional spatial analyses

The second part of this study focused on the specific categories of firms that have been shown to be attracted to metropolitan areas by air service—professional and administrative services—and determined their spatial distribution in comparison to the airport. Figure 3 is an example of how the four different spatial analyses look in one metro region, plus the major pieces of infrastructure I discussed earlier.

The weighted mean center analyses of key infrastructure and professional services, indicated that for only 8 of the 25 airports studied (including Phoenix as pictured), that the center is within 5-6 miles of the airport. In other words, for two-thirds of the airports studied, the economic benefits are occurring at a greater distance from the airport than the negative effects. The standard deviational ellipses showed that this distance might not be too far: 76 percent of the airports were within the ellipse, suggesting that even if airports are not in close proximity to the center of airport-related development, they are within one standard deviation of it. However, that distribution might not be even across space. Local and global Moran’s I analyses showed that professional service firms and their associated jobs are clustered in space—but of the 25 airports studied, only 8 were in or adjacent to a “hot spot” of these firms. Six were in a “cold spot.” The airport may be driving economic activity within the region—but more often than not, that activity is occurring outside the vicinity of the airport.

The goal of my research was to empirically explore the frequently-made statement that airports are the “economic engines” of their regions. There are two parts to this: to what extent are airports drivers of local employment as compared to other large pieces of infrastructure, and what is the spatial distribution of the firms brought to a region by its air service?

In both cases, I found that the “economic engine” claims are probably overstated, at least when we compare their spatial distribution to the distribution of the airport’s negative effects. Other major pieces of infrastructure such as shopping malls and wastewater treatment plants have as many or more jobs in their vicinity as airports do. The professional services firms that have been shown to be attracted to metropolitan regions are clustered in space rather than being evenly spread throughout the region, and those clusters are more often than not outside the range of where negative environmental and economic effects occur.

Any large piece of infrastructure, whether an airport, a shopping mall, or a wastewater treatment plant, will have positive and negative effects both within the immediate vicinity and across the entire region. Nevertheless, such infrastructure has to be sited somewhere.

Taking into account the spatial distribution of that infrastructure’s effects, both positive and negative, can make clearer the questions of who benefits and who pays—as well as what might be done to offset the costs for those who suffer the negative effects of such infrastructure without reaping the economic benefits.

This article is based on the paper ‘The role of major infrastructure in subregional economic development: an empirical study of airports and cities’, in the Journal of Economic Geography. 

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About the author

Julie Cidell 80x108Julie Cidell – University of Illinois at Urbana-Champaign
Julie Cidell is an associate professor at the University of Illinois at Urbana-Champaign, where her work focuses on two main areas: the political economy of transportation, and green buildings and public policy. She has also worked as a transportation engineer in Boston and taught physical geography in northern and southern California

http://blogs.lse.ac.uk/usappblog/2014/11/04/claims-that-airports-are-a-citys-economic-engine-are-overstated-especially-when-compared-to-other-local-infrastructure/

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Similar conclusions were reached in 2013 in a paper by C E Delft:

Aviation report “claims about the economic benefits of connectivity are not founded on solid evidence”

22.4.2013

Major new aviation report argues “claims about the economic benefits of connectivity are not founded on solid evidence”

A major new report, launched today in the House of Commons, challenges the view that improved international air connectivity will necessarily bring significant benefits to the UK economy.

The report The Economics of Airport Expansion by the independent Dutch consultants CE Delft, and commissioned jointly by WWF, RSPB and the Heathrow campaign group HACAN, argues that “claims about the economic benefits of connectivity are not founded on solid evidence.”

The report was launched at packed meeting hosted by Zac Goldsmith MP.The speakers included Jasper Faber from CE Delft, the main author of the report.

The report is timely.  The Airports Commission, set up by the Government under Sir Howard Davies, has been charged with looking at whether the UK, and in particular London and the South East, requires additional airport capacity in order for the UK to maintain its first rate international links over the coming decades.  At present the Commission is actively “seeking evidence on aviation connectivity” with a discussion paper

CE Delft concluded: “many studies find a positive correlation between aviation and economic growth, but no causal relationship between connectivity and economic growth was found”.  Their analysis of the evidence shows that increasing connectivity is less beneficial for developed countries than for developing economies.  They also found that extra connectivity in cities that are already well-connected, like London, does not necessarily deliver measurable or substantial economic benefits.

The report also challenges the way that the costs and benefits of airport expansion have traditionally been measured.  It points out gaps in the Cost Benefit Analysis (CBA) which should “provide an overview of current and future pros and cons of a particular project for society as a whole (public, private sector and government) as objectively as possible.”  It argues that the DfT’s current Cost-Benefit Analysis method still omits key social or environmental costs, resulting in an overestimation of economic benefits.

There are also enormous uncertainties in CBA work as it must predict future demands and costs. For example, the Department for Transport estimated that Heathrow expansion would produce £5 billion in economic benefits but when the New Economics Foundation re-ran their figures using different predictions for growth and oil prices but the same models they found that Heathrow expansion would result in a £5 billion loss (1).

This report also looks at some of the economic arguments being used by proponents of airport expansion and finds them to be miscalculated and exaggerated, distorting the aviation debate (2).

RSPB economist Adam Dutton said, “This report highlights the uncertainty surrounding the economic benefits of aviation expansion. New airport infrastructure could destroy internationally important and increasingly scarce habitat, such as that found in the Thames estuary, and jeopardise the UK’s legally binding greenhouse gas emissions targets, all for uncertain economic benefit and a net loss to society. More specifically, this report urges caution about automatically linking improved connectivity with economic performance. While some base level of connectivity is important for any economy, this report demonstrates that the benefits of extra connectivity in a city as well connected as London are doubtful and difficult to demonstrate with certainty”.

Jean Leston, head of transport policy at WWF, said, “The methods for assessing the benefits and costs of new runways and airports are hopelessly inadequate and open to gross manipulation.  CE Delft has instilled a dose of reality into the airports debate.  We hope that the Airports Commission and the Department for Transport will adopt the better SCBA methodology and require development proposals to do the same.”

HACAN Chair John Stewart said, “This report could not be more timely.  It comes just as the Airports Commission is asking the hard questions about airport capacity and connectivity.  And its message is clear:  new runways may not be nearly as important for our economy as is commonly assumed.”

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The economics of airport expansion  (55 pages)

Economics of Airport Expansion – short commentary (2 pages)

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http://www.airportwatch.org.uk/?p=2597

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