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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.
