Transport infrastructure and industrial agglomeration: Evidence from manufacturing industries in China

Abstract

The determinants of industrial agglomeration have attracted worldwide attention as a research topic since the 1990s; however, there is still some divergence of opinion on the relationship between transport infrastructure and industrial agglomeration. To reconcile these divergent views, we take highways as a typical example of transport infrastructure and undertake an empirical examination based on a sample of 1,660,551 observations of Chinese manufacturing firms covering the period 1998 to 2007. The findings confirm that highway improvement has a positive impact on industrial agglomeration as a whole. We also find that the impact is heterogeneous across industry groups: improvement in the highway network positively affects the agglomeration of non-locally based industries and relationship industries but negatively affects the agglomeration of locally based industries and non-relationship industries.