Distributional effects of expressway access on rural entrepreneurial activities in China

Abstract

Transportation infrastructure development, such as expressways, could impact economic development in local and neighboring regions differently. However, there is limited evidence of these impacts on rural and developing areas. Here, we use Heyuan, a rural region in China, as the case to examine the effects of expressway access on entrepreneurial activity. Using detailed township-level panel data from 2004 to 2016 and a multiple-period DID model with spatial effects, we find that opening entrances and exits significantly promotes entrepreneurial activities in local towns but suppress them in adjacent towns. Furthermore, we find that the development of expressways leads to a greater concentration of firms in the provincial centers of towns with better economic development. The development of expressways has had a significant boost on tertiary industries. This study shows that the construction of highways attracts entrepreneurial activities to regions with better conditions, and this maximizes economic efficiency but at the expense of creating regional economic imbalances. Therefore, this model may be the primary model of China's economic development in the future.