Subways and the Diffusion of Knowledge: Evidence from China

Abstract

AbstractThis paper aims to examine the role of the subway network, a typical form of transportation within urban areas, on innovation and knowledge diffusion. Applying the difference‐in‐differences strategy and spatial analysis, we used 1,332 newly opened stations in China from 2000 to 2013 as a quasi‐experiment to identify the local effects of subway expansions. Results suggested that by reducing communication costs and increasing opportunities for interaction, subway construction would bring growth at the district level. Knowledge dissemination would become more active after new stations open. Micro‐level results showed that these positive impacts were highly localized; that is, only those firms located within 1km around stations benefited from the new subway. Moreover, new subways facilitated the flow of knowledge from station to station and assisted firms in acquiring knowledge from more distant technology clusters conveniently.