Spatial dependence in (origin-destination) air passenger flows

We explore the estimation of origin-destination (OD), city-pair, air passengers, in order to explicitly take into account spatial autocorrelation. To our knowledge, we are the …rst to test the presence of spatial autocorrelation and apply spatial econometric OD ow models to air transport. Drawing on a world sample of 279 cities, over 2010-2012, we …nd signi…cant evidence of spatial autocorrelation in air passenger ows. Thus, contrary to common practice, we need to incorporate the spatial structure present in the data, when estimating OD air passengers. Importantly, failure to do it, may lead to ine¢ cient estimated coe¢ cients and prediction bias.