Can commuting facilitation relieve spatial misallocation of labor?

Abstract

Migration barriers often lead to the spatial misallocation of labor across cities. Commuting facilitation is expected as the effective way to relieve labor spatial misallocation. This paper uses China's high-speed rail (HSR) network project as a source of exogeneous variation in commuting facilitation to examine its impact on labor spatial misallocation across cities. Results show that commuting facilitation plays a role in relieving labor spatial misallocation. The degree of labor spatial misallocation decreases by 5.2 percent when cities are directly connected by HSR. Market potential serves as the key mechanism for HSR network to reduce spatial misallocation. By the relief of spatial misallocation, HSR network increases the aggregate labor productivity and employment of the HSR-connected cities. However, the distributional effects of HSR network generate different impacts on core and peripheral cities. In particular, HSR network displaces the employment of skill-intensive sectors from periphery to core, and meantime promotes the employment creation of labor-intensive sectors in the periphery. Despite siphon effect, HSR network improves the labor productivity of both core and periphery. We consequently argue that siphon effect derived from commuting facilitation is not always harmful, and it could also be a driver to relieve misallocation.In addition, the effect of HSR on spatial misallocation increases with the improvement of HSR services quality, and weakens with the difficulty of labor in relocation.