High-Speed Rail and Manufacturing Agglomeration

Abstract

In China, the roles played by high speed rail (HSR) in improving regional accessibility and promoting urban growth have recently generated significant research interest. However, the question as to how HSR could shape urban development seems rather complex. This paper aims to discuss HSR's role in shaping urban economic development by tracing links from HSR to manufacturing agglomeration with panel data from the Beijing–Guangzhou HSR network in China from 2000 to 2015. On the basis of the new economic geography model, market potential and manufacturing wages are incorporated into the analysis framework, and a treatment effect model is used to account for the endogeneity of HSR in the study. Model results provide three conclusions. First, in general, HSR significantly increases manufacturing agglomeration for HSR cities. Second, an inverted-U relationship between the agglomeration impact of HSR and market potential is confirmed. That is, while the agglomeration effect by HSR is significantly within a threshold level of market potential, HSR in fact has a negative effect, or the dispersion effect, on manufacturing agglomeration beyond the threshold level. Third, the agglomeration impact of HSR differs across regions. For example, the agglomeration impact of HSR is more significant in the second-tier HSR cities than in major HSR cities, indicating the overall trend of regional integration and economic convergence among different regions of HSR through time. Results from this study are useful for policy makers as well as for researchers for analyzing the economic implications of HSR in the future.