Reciprocal State and Local Airport Spending Spillovers and Symmetric Responses to Cuts and Increases in Federal Airport Grants

Public Finance Review. 2002 (January), vol. 30 no. 1: pp. 41-55.

Posted: 8 Aug 2016

See all articles by Jeffrey Cohen

Jeffrey Cohen

University of Connecticut - School of Business

Date Written: 2002

Abstract

How states and localities react to federal airport grant cuts is a question of increasing importance, especially in light of recent congressional funding reauthorization debates. This study finds that states and localities behave in the way public finance theory predicts. The magnitude of an airport spending change is the same (but in opposite directions) for a cut and an increase in airport grants. Thus, the flypaper effect operates in both directions. Spillovers arising from airport spending are also considered. With the hub and spoke structure of the U.S. air transportation system, a spending increase on airports experiencing major time delays confers spillover benefits on individuals in other states in the form of travel time savings from decreased congestion. These spillovers are reciprocal. There is significant evidence of such interdependencies, and an individual state raises airport spending by between 50 and 60 cents when other states increase airport spending by 1 dollar.

Keywords: airports, spatial spillovers, flypaper effect

JEL Classification: R4, H7

Suggested Citation

Cohen, Jeffrey, Reciprocal State and Local Airport Spending Spillovers and Symmetric Responses to Cuts and Increases in Federal Airport Grants (2002). Public Finance Review. 2002 (January), vol. 30 no. 1: pp. 41-55., Available at SSRN: https://ssrn.com/abstract=2819612

Jeffrey Cohen (Contact Author)

University of Connecticut - School of Business ( email )

368 Fairfield Road
Storrs, CT 06269-2041
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
209
PlumX Metrics