High-Speed Rail and Sustainable Regional Development: Evidence from Factor Allocation in China

Within a spatial-economics framework, this paper extends a general-equilibrium model to examine how high-speed rail (HSR) openings reduce migration costs and thereby alleviate regional factor misallocation. The model predicts that improved connectivity lowers labor mobility frictions, facilitates cross-regional reallocation of productive factors, and reduces misallocation. Using a panel of China’s prefecture-level cities from 2006 to 2016 and a difference-in-differences design, we estimate the causal effects of HSR on the misallocation of labor and capital. The results show that HSR openings significantly improve both labor and capital allocation, and the findings remain robust to a range of endogeneity checks and alternative specifications. Heterogeneity analyses indicate that the improvement is concentrated in eastern cities, while the effects are statistically insignificant in central and western regions. We also find that the reduction in misallocation occurs in both provincial capital and non-capital cities. These results imply that HSR can enhance resource-use efficiency and support sustainable regional development by reducing spatial frictions and promoting more balanced factor allocation. From a policy perspective, accelerating HSR network expansion can lower cross-regional mobility costs and enable freer flows of labor and capital, thereby improving allocative efficiency and fostering inclusive and sustainable growth.