The Impact of Improved Passenger Transport System on Manufacturing Plant Productivity

Abstract

In this paper, we examine the effect of transportation infrastructure on the productivity of manufacturing plants. In particular, we analyze whether improved passenger transportation connections to metropolitan cities positively affects manufacturing plant productivity in non-metropolitan counties. The recent introduction of the Korea Train eXpress(KTX) high-speed train allows us to study the causal impact of improved passenger transport. We apply a difference-in-differences framework to plant-level data, by exploiting the exogenous timing of high-speed train introduction and the location of the new KTX stations which have not been altered endogenously. Specifically, we compare the plants in counties without high-speed train stations with those in the counties with high-speed train stations. The empirical results suggest an increase of approximately 4.6 percent in the productivity of manufacturing plants due to the introduction of the high-speed train. Our analysis suggests this might have resulted from increased ability to recruit highly skilled younger workers to the manufacturing plants connected by the KTX high-speed train.