The impact of high-speed rail on urban economy: Synergy with urban agglomeration policy

Abstract

The economic externality of transportation infrastructure is related to the local policy environment. China's high-speed rail (HSR) is developing simultaneous with urban agglomeration (UA). This study examines the synergy of HSR operation and UA policy implementation on the urban economy. With the data on 285 prefecture-level cities of China joining the HSR network and UAs from 2003 to 2018, we use staggered difference-in-differences (DID) design to test the individual and joint impacts of HSR and UA policy on urban economy respectively. Our result shows that the joint impact of the two interventions is significantly stronger than the individual impact, which means the existence of the synergy effect. Exploration of the synergy mechanism identifies three channels through which the HSR effect is strengthened by UA policy: (a) Institutional integration effect: UA policy has eliminated the administrative barriers in HSR operation. (b) Spillover effect: UA policy has diffused the benefits of HSR, and (c) Efficiency effect: UA policy planning has strengthened the drive of HSR to urban efficiency. In addition, we find the specific sequence of intervention, the inauguration of HSR after the implementation of UA policy, can better promote the economy. Finally, a heterogeneity analysis is performed to study the impacts on center cities and non-center cities. We emphasize the importance of the cooperation of transportation infrastructure and regional policies, and provide a theoretical basis for the development of HSR industry and the implementation of UA strategy in China.