Business travel during the Covid-19 pandemic has ground to a halt, with many arguing that it’s unlikely to truly recover again, as the business world gets used to conducting business virtually rather than face-to-face. This is hugely problematic for the travel industry, who make the vast proportion of their revenue from business travel, but new research from Harvard’s Growth Lab suggests it’s also hugely problematic for global economic growth.
The researchers hypothesize that the transfer of tacit knowledge and know how is crucial to economic growth, and business travel plays a key part in that process of repetition, imitation, and feedback. As such, they raise concerns about the economic implications of the restrictions on international travel imposed during the pandemic.
The researchers used transaction data from Mastercard to map the global flow of business travel. It’s part of a body of work Harvard have been doing with the Mastercard Center for Inclusive Growth to create a Knowhow Index, which aims to rank countries on their incoming and outgoing knowhow.
“We’ve been puzzled by the fact that business travel has been growing faster than world GDP, despite the widespread adoption of alternatives like Skype, FaceTime, email, etc.,” the researchers say. “We posited that maybe there is a difference between moving information and moving brains. We obviously never imagined a complete shutdown of business travel, but the paper allows us to delve into the consequences.”
Spreading knowhow
The researchers created an interactive visualization that highlights what would happen if business travel disappeared from particular countries. For instance, they highlight how Germany business travel heavily affects countries such as Austria, Czechia, and Switzerland, and if they were to stop travelling, global GDP would fall by 4.8%.
“According to our study, the world is benefiting enormously by mobilizing the knowhow in brains through business travel. A permanent shutdown of this channel would probably imply a double-digit loss in global GDP,” the researchers explain.
The popularity of business travel also highlights another development divide, however, as things like long connections and cumbersome visa regimes also constrain the exchange of knowledge, and limit growth opportunities, with these problems particularly pronounced in developing countries.
The study is a useful reminder that business travel is pretty beneficial to the global economy, and we should be cautious about jettisoning it completely in response to Covid-19.
