High-Speed Rail and Industrial Movement: Evidence from China’s Greater Bay Area

Abstract

In the context of industrial movement, firms face a trade-off between increasing agglomeration benefits and rising costs for doing business along the high-speed rail (HSR) corridors, given that they promote market integration and strengthen agglomeration economies. This study examines the causal impact of the HSR extension on the industrial movement patterns in China’s Greater Bay Area (GBA). We analyze two firm-level datasets for the period 2007–2018 using the difference-in-differences method. We find that large-scale manufacturing firms exhibit a decentralization trend in the central GBA after the HSR extension, but that service sectors show a clustering pattern in GBA. However, this pattern differs between GBA and other regions, urban districts, and suburban counties, which highlights the redistribution effect of the HSR extension on the industrial growth across regions. These findings have important implications for industrial policymaking, as they help decision-makers reflect on the potential industrial movement trend in relation to the impact of HSR expansion.