Local economic effects of connecting to China’s high-speed rail network: evidence from spatial econometric models

Abstract China’s high-speed rail (HSR) has quickly expanded to over 40,000 km of lines operating and another 10,000 km under construction. This is over 10 times longer than the networks in long-established HSR countries like France, Germany or Japan. While fewer than 100 county-level units had stations on the HSR network in the first years of operation, the eight years from 2012 to 2019 saw almost 400 more county-level units connect to the HSR network. Impacts of this significant expansion in connections to the HSR network on local economic activity remain contested. Some prior studies report either no significant effects on local economic growth or even adverse effects in some areas. Given this debate, we use spatial econometric models on a panel dataset comprising nearly 2500 county-level units to study the impact of connecting to the HSR network. We concentrate on the 2012–2019 period that has high-quality nighttime lights data to supplement GDP data as an indicator of growth in local economic activity. Our spatial econometric models allow for spatial lags of the outcomes, of the covariates, and of the errors. We also tackle the possible endogeneity of the HSR networks and connections by employing an instrumental variables approach. Across a range of specifications, we generally find lower growth in local economic activity following connection to the HSR network. These negative effects appear especially in areas with lower population density. The continued expansion of China’s HSR network may not necessarily stimulate local economic growth, even if it serves other strategic purposes.