High-Speed Railways: Do They Produce Economic Growth?

Abstract

The debate surrounding the economic benefits of extending the US high-speed passenger rail system beyond the small stretch between Washington, DC, and New York City has abated somewhat but remains of policy interest. One of the justifications advocates cite for high-speed rail (HSR) is that it can provide important stimuli to the national and select regional economies. That argument is difficult to assess in the abstract, but it may be possible to glean some insights by studying systems that operate elsewhere. To that end, this paper examines the information available regarding the world’s three largest HSR systems—those of China, Japan, and Spain. The approach is not only to look at the broad effects of those systems on the macroeconomic development of the countries involved but also to consider their more localized, regional implications. The investigation is hindered by fragmented data and data gaps, particularly gaps in data about the financial costs and opportunity costs of HSR systems. What does emerge is that, although politicians and rail enthusiasts have widely supported HSR infrastructure investment as a catalyst for economic development, academic writings abound with considerable skepticism about the economic value of such investment. Furthermore, in virtually all cases, the development argument presented in support of HSR has proved to be overly optimistic, and the anticipated economic growth effects have been minimal or even negative. Where ex ante justification has been for a geographical shift of economic activity—typically away from congested to economically deprived locations—the outcomes have seldom been as hoped.