Do China's high-speed-rail projects promote local economy?—New evidence from a panel data approach

Abstract

This paper evaluates the effect of High Speed Rail (HSR) projects on the economic growth of targeted city nodes (HSR cities) in China using prefectural-level city data from 1990 to 2013. Employing a panel data program evaluation method devised by Hsiao, Ching, and Wan (2012), we construct hypothetical counterfactuals for per capita real GDP of HSR cities in the absence of their respective HSR projects using the outcomes in selected non-HSR cities. We find that the responses to HSR treatment are heterogeneous with regard to location, route, and region. The location-level impact ranges between 5% and 59% and is not temporary. HSR cities with positive effects concentrate along the Hu-Ning Segment, the Yong-Tai-Wen-Fu-Xia Segment, and within the Hunan province along the Wu-Guang HSR. These cities are mainly located in the eastern coastal regions of China, in core urban agglomeration regions that allow them to be transportation hubs. In general, the gain for local economies is greater for cities that are more industrialized, with more ability of the service sector to absorb enough labor, and with better supporting infrastructure. On the other hand, local protectionism hampers the development of HSR cities. We also show that at different project stages, HSR cities experience different gains.