The Effect of Air Transport to Economic Development in Indonesia

Air transport in Indonesia shows exponential growth over the last decade. The geographical condition as an archipelago country has made air travel the most popular way of transport. Thus leads the government to put a lot of expectation to air transport industry as the engine of economic growth. This paper analyzed the effect of air transport to the economic development which is represented by the industry sectors. The interaction between air transport and economic development has been said to be a two-way mutual benefit relationship. Thus, first this study examines which industry sectors have effect on air transport, which then will shed a light on how air transport effects economic development. The analysis of the data was based on Indonesia’s annual data, retrieved in 2012. The Bardsen transformation proved that only tourism sector has a significant effect on air transport, while other sectors did not. Indonesia being a tourism oriented country, air transport would most likely affect economic development by providing a platform for tourism sector to grow.