Interesting new paper out in the Journal of Law & Economics on the impact of post-9/11 airport security measures on the demand for air travel in the U.S.
We examine the impact of two post-9/11 airport security measures—baggage screening and federalization of passenger screening—on demand for air travel in the United States. Exploiting the phased introduction of security measures across airports, we find that baggage screening reduced passenger volume by about 6 percent on all flights and by about 9 percent on flights departing from the nation’s 50 busiest airports. In contrast, federalizing passenger screening had little effect on passenger volume. We provide evidence that the reduction in demand was an unintended consequence of baggage screening and not the result of contemporaneous price changes, airport-specific shocks, schedule changes, or other factors. This decline in air travel had a substantial cost. Back-of-the-envelope calculations indicate that the airline industry lost about $1.1 billion because of the decline, which is 11 percent of the loss attributed directly to 9/11.