The Impact Of High-Speed Railways On Local Economy

Since the reform and opening up,China's economic has made remarkable achievements.GDP growth rate continued to grow at 9.7%,and in 2010,China became the world's second largest economy instead of Japan,creating a miracle in the history of economic development.An objective fact is that the miracle is closely related to a large-scale transport infrastructure investment implemented by the Chinese government in the same period.Many scholars believe that the development of advanced transport infrastructure is a key factor driving the "China's economic miracle".Into the 21 st century,China has carried out an unprecedented high-speed rail(HSR)construction.In less than 10 years,the HSR network has connected more than 60% of China's prefecture-level cities.According to the latest statistics of the International Union of Rails(UIC),China has built more than 23,000 km of HSR till July 2017,accounting for 60% of the world.More than 2500 bullet trains runs on the network everyday,and the ridership is beyond 800 million in one year.HSR is regarded as one of the most significant breakthrough in passenger transport.The bullet train runs at 2-3 times of the speed of ordinary trains,which can save much time for the passengers and expand their travel distance.Spiekermann and Wegener(1994)points out that HSR makes the whole continent smaller,which may catalyze the development of society as a whole.So,what impact does HSR has on China's regional economic development?Many scholars examined the relationship between transport infrastructure and regional economic growth.However,the study of the impact of this new type of transport infrastructure on regional economy is rare in the literature.The conclusion of this question is of great controversy(Yin et al.,2015).Some scholars believe that HSR can promote economic development and increase population and employment.But others contend that HSR may have a "Siphon effect",which may lead to a loss of local economic resources,and thus inhibit economic growth.Some scholars also argue HSR can not promote economic growth or will have differential impacts for different places.With the development of HSR in China,there are also some spefic studies for China's HSR,but still,the conclusion is inconsistent(Zheng and Kahn,2013;Qin,2017).Although scolars have used different data from around the world to investigate the effect of HSRs on the regional economy,several important issues in the literature are ignored.First,early studies for HSR only find a correlation between HSR and regional economic growth,not a causal relationship.Economics care more about the causal effect nowadays,so large sample and advanced econometrics should be employed to identify the causal relationship between HSR and regional economic growth.Second,literature on the distribution effect of HSR is insufficient.Transport infrastructure will stimulate the movement of production factors between space,change the spatial distribution of economic activity,lead to agglomeration or diffusion,which is named "Distribution effect" in New Economic Geography.Whether the HSR will lead economic activities to agglomerate or diffuse in space is not clear in literature.Third,literature on impact of HSR on regional specialization is not sufficient.HSR will not only lead to the transfer of production factors in space,but also in industries.Which industries will benefit and how the HSR will change regional specialization modes are also not clear.Fourth,research on the channels through which HSR influence regional economy is not sufficient.At present,the studies in this field mostly focus on the national or regional level.However,researches in macro level can not adequately analyze the effects of HSR on enterprises and families,and thus can not clarify the micro-channels of HSR affecting regional economy.The rapid development of China's HSR provides a good empirical environment for us to examine the impact of HSR on the regional economy.The opening up of HSR gradually makes a quasi-natural experiment,which we can use to identify effects of HSR.Cities with HSR passing through,can be regarded as the experimental group;accordingly,cities with no HSR passing through,can be regarded as control group.Therefore,we can use a Difference-in-Difference approach to estimate the impact of HSR on the regional economic,by comparing the changes between the experimental group and control group after HSR operating.This approach can eliminate the initial difference of economic development between the experimental group and control group,and also exclude the impact of other events,which have the same effect both groups,therefore,it can identify causal effect of HSR.Using city and industry data from China's Urban Statistical Yearbook,and firm data from Chinese Industrial Enterprises Database,this paper employs the Difference-in-Difference approach to study the impact of China 's HSR on the regional economy from three different levels.Firstly,we estimate the impact of HSRs on the regional economy in China,using a prefectural city panel data from 2001 to 2015.First,we found that HSRs did promote local economic development,but the impact of HSR is not growth but level effect.In specific,after the opening of HSR,the total population,GDP,and per capita GDP of the city increased significantly,while the population growth rate and GDP growth rate did not change significantly.This result is still true after we remove the large city sample and use instrument variable to deal with the endogenous problem according to Faber(2014).we investigate the "Distribution effect" by estimating the impact of HSR on both big cities and small cities.We find bigger cities benefit more with the arrival of HSR while small cities do not change much,leading to a larger gap between cities.In the end,we found that the big increase in local fixed asset investment is the main reason for the impact of HSR on the regional economy,while the growth of employment and FDI can only partly explain the impact.Secondly,we use the rich employment information of China's Urban Statistical Yearbook to study the impact of HSR on urban employment and specialization mode.we found that HSRs increase urban employment,both for unit employment and private employment.In terms of economic structure,HSR has significantly improved the employment in the secondary and tertiary industries,and reduced it in the primary industry.This conclusion is still consistent when we utilize the commonly used Inconsequential Place approach to deal with potential endogenous problem.we calculated the dependence of each industry on passenger transport according to the input-output table,and constructed a quasi-natural experiment to identify the causal relationship between HSR and urban employment,and study the effect on specialization mode,using a Difference-in-Difference-In-Difference approach.We found HSR facilitated the development of industries relying more on passenger transport,therefore,changed city's economic specialization mode.Finally,we investigate the heterogeneity of impact on the different industries,we found a positive relationship between HSR's effect and industries' dependence on passenger transport.Finally,Exploiting China's first HSR(Qinhuangdao-Shenyang passenger line)as a quasi-natural experiment,we estimate the impact of HSR on labor productivity,using firm level data from Chinese industrial enterprises database.Using Shenshan-line as an instrument variable to solve the problem of endogeneity,we found HSR increased labor productivity by 9% in manufacture firms.HSR is a new passenger transport infrastructure with great speed and capacity,which can speed up the flow of labor force between regions and realize the optimization of resource allocation,thereby improve labor productivity.To test this hypothesis,we estimate the effect using sub –samples.We found Non-SOEs with employees more mobile increase more in labor productivity,compared with SOEs;and capital-intensive firms with employees more capable to switch jobs increase more,compared with labor-intensive firms,suggesting that HSR promoted the labor productivity though facilitating labor flow to optimize resource allocation.The main innovations of this paper include the following aspects:First,most studies in the literature only estimate the impact of HSR on the GDP or employment using data from different countries or regions,few investigate the "Economic distribution effect".This paper examines the impact of HSR on big cities and small cities respectively,to analyze the "Economic distribution effect" of HSR.The result shows a apparent "Economic distribution effect" : We find bigger cities benefit more with the arrival of HSR while small cities do not change much,leading to a larger gap between cities.Second,this paper calculated the dependence of each industry on passenger transport according to the input-output table,and constructed a quasi-natural experiment to identify the causal relationship between HSR and urban employment,and study the effect on specialization mode,using a Difference-in-Difference-In-Difference approach.We found HSR facilitated the development of industries relying more on passenger transport,therefore,changed city's economic specialization mode.Some studies have studied the impact of other traffic infrastructure(expressway and airport)on the regional economy specialization,but there are few studies on the specialization of HSR.This paper enriched the literature,and deepened our understanding of the impact of HSR on regional economy.Third,At present,the studies in this field mostly focus on the national or regional level,which can not clarify the micro-channels of HSR affecting regional economy.we exploit China's first HSR as a quasi-natural experiment,to study the impact of HSR on labor productivity using a Difference-In-Difference approach.We found that HSRs did significantly improve the labor productivity of enterprises near HSR stations.Estimating the effect of sub–samples,we found HSR promoted the labor productivity though facilitating labor flow to optimize resource allocation.This paper provides a clear channel in micro level,through which HSR affects the regional economy.Fourth,this article also has some innovation in the research methods.First,all the empirical studies are based on the Difference-In-Difference approach,and we also carried out a variety of robustness check,so we did some progress in identifying causal relationship between HSR and regional economy.Secondly,this paper uses three different approaches to deal with the potential endogenous problem in the three empirical parts.