When Does Air Transport Infrastructure and Trade Flows Matter? Threshold Effects on Economic Growth in ASEAN Countries

This study examines how air transport infrastructure and trade flows influence economic growth across ASEAN countries, with a focus on identifying the threshold levels at which these factors begin to enhance growth. Despite increasing investment in regional logistics and connectivity, policymakers often lack evidence-based thresholds to guide infrastructure and trade policy for long-term development. Addressing this gap, this study applies a Dynamic Panel Threshold Model to uncover the tipping points at which improvements in air cargo volume (lnCargo) and air transport infrastructure quality (lnQAir) translate into stronger economic growth. By employing System-GMM and First-Difference GMM estimations, the analysis captures the threshold effects of air cargo volume (lnCargo) and air transport infrastructure quality (lnQAir) on economic growth over varying regimes. The results reveal significant single-threshold effects for both lnCargo and lnQAir, indicating that their contributions to economic growth become substantial after surpassing specific critical levels. When air cargo volume exceeds approximately 267,067 tons per year (lnCargo > 5.5875), its positive effect on economic growth strengthens, particularly when accompanied by high-quality infrastructure. Similarly, air transport infrastructure quality exhibits a significantly stronger impact on economic growth once it exceeds the critical threshold of lnQAir = 1.5476 (≈4.7001 index points). These findings emphasize the complementarity between trade flows and infrastructure, aligning with endogenous growth theory, which suggests that infrastructure investments yield increasing returns when integrated with trade expansion. Policy implications suggest that ASEAN economies should adopt demand-driven infrastructure development aligned with trade dynamics, prioritizing regional connectivity, logistics efficiency, and investment attraction to sustain long-term economic growth.