Does Proximity to Expressways Improve Manufacturing Productivity? Evidence from Chinese Firms

Abstract

By matching the geocoded data of firm-level productivity and county-level expressway networks in China’s Yangtze River Delta region, we establish a difference-in-differences model to investigate the impact of expressways on manufacturing firm productivity. The results show that expressways boost manufacturing firms’ total factor productivity, with firms closer to expressway services achieving more significant productivity increases compared to those farther away. The results remain robust after controlling for the endogeneity problem using an instrumental variable approach. Expressways promote firm productivity by reducing inventory costs and increasing firm profitability and regional industrial concentration, whereas their effect on product innovation is insignificant. We also find heterogeneity in the impact of expressways on firm productivity, with firms in peripheral counties and in labor-intensive industries receiving a weak productivity-enhancing effect, while firms in central regions and those with high transport dependency benefit more.