Analysis Of The Effect On China’s Economic Development Of Highway Construction

The relationship between transportation infrastructure and economic development has always been a concerned issue. As a necessary part of transportation infrastructure, highway has important significance on economic development in China. By the end of 2014, the traffic mileage of highway in China has reached 11.2 million kilometers which ranks as first i n the world. Highway construction shortens the space-time distance and promotes rational movements of factors among different regions to a large extent, and it also guides the rational resources allocation in a wider range.First, discuss the relationship between highway and economic development from the aspect of new economic geography, new classical economics and urban economics. Especially explain the reason why highway construction has impact on economic development through theoretical model. Besides, s tate the internal mechanism from the perspective of factor mobility, regional function and enterprise location, explaining the existence of endogenous problem.Secondly, there is an endogenous problem between highway construction and economic development. The previous researches always ignored this problem which led to estimate errors. Eliminate endogenous through the method of instrumental variable. As terrain topography is innate, it directly influences the highway construction but has no direct relation to economic development. So choose the proportion of the area of mountains and hills in every provinces as an instrument variable for highway construction. The object of study is 29 provinces panel data of China from 1997 to 2014.Then provide the rationality verification for the selection of instrumental variable. Choose the fixed effect model through Hausman test and use two-stage least squares method(2SLS)for empirical analysis. The result shows that the estimation given by IV method is higher than other models. And the estimated coefficient is more realistic under IV method.At last, verify the method of instrument variable used in empirical analysis is reasonable through robustness examination. Policy recommendations are given, such as speed up infrastructure construction in rural areas, optimize the layout of highway and develop the guiding role of government.