High-speed rail, firm agglomeration, and PM2.5: Evidence from China

Abstract

• The aggregate effect of HSR on local air quality in China was investigated. • The impact of HSR on air quality through firm location was empirically measured. • Annual PM2.5 concentration declines by about 2.8% after a county was connected to HSR. • The elasticity of PM2.5 concentrations to the number of firms is about 0.25. • HSR can be used as an instrumental variable to explore the influence channels of air pollution. Over the past decade, China has built the most extensive high-speed rail (HSR) network in the world. This study estimated the effect of HSR connectivity on the local air quality in China between 2004 and 2016. Through difference-in-differences estimation, we found that on average, the concentration of particulate matter with a diameter of 2.5 μm (PM2.5) declined by 2.8% after a county had been connected to the HSR network. As industrial activities are the highest source of pollution, HSRs can affect local PM2.5 concentrations by changing firm and/or industrial agglomeration patterns. We further explored this channel by using HSR connectivity as an instrumental variable, and found that PM2.5 concentrations will decline by 2.74% on average due to the migration of polluting firms induced by HSR connections. The results indicate that the response of firms to HSR is important in understanding the spatial distribution of air pollution in China.