High‐speed railway and urban productivity disparities

Abstract

AbstractLarge scale transport infrastructure constructions connect both large metropolitan cities as well as small peripheral cities. Transportation cost reductions facilitate the reallocation of labor factors between these asymmetric regions. Whether the results of labor reallocation narrow down the inter‐regional considerable discrepancies or reinforce the disparities in productivity is uncertain. This paper explores the opening of China’s High‐Speed Railway (HSR) program as a quasi‐natural experiment to estimate the causal effect of the HSR connection on urban disparities in labor productivity. To address the selection bias caused by non‐random placements of HSR routes, we eliminate all metropolitan city nodes and construct a minimum spanning tree as the instrumental variable. Compared with peripheral cities not connected by the HSR, the labor productivity in connected peripheral cities decreases by 12.6% after the opening of the HSR. Using China Migrants Dynamic Survey (CMDS), we further find that the decline of labor productivity is driven by the relocation of high‐skilled labor from the HSR connected peripheral cities to the central cities. This article concludes that the HSR widens the productivity disparities between the large central metropolitan and small peripheral cities connected.