How Metro Expansion Influences Enterprise Labor Misallocation

ABSTRACT This paper investigates the effect of metro expansion on enterprise labor misallocation in China, using a double machine learning (DML) model with data from A‐share listed companies from 2013 to 2022. Our findings reveal that metro expansion significantly mitigates enterprises' labor misallocation. This effect is more pronounced for labor‐intensive and state‐owned enterprises, as well as for those located in developing urban agglomerations and regions with advanced digital infrastructure. Further mechanism analysis shows that this reduction operates through two distinct channels. On the supply side, metro networks deepen the labor market, thereby improving job‐matching efficiency. On the demand side, by intensifying competition, metro expansion erodes enterprises' market power, thereby improving allocative efficiency through the realignment of wages with marginal productivity. This study provides empirical evidence at the micro level, highlighting the role of urban transit infrastructure in improving resource allocation.