High-speed rail to prosperity? Assessing the role of transportation improvement in the urban economy

Investigate the impact of high-speed rail (HSR) on local economy is of great importance and interest to policy makers and scholars. Though there is a big body of literature in this area, the estimates of such impact are inconsistent or even contradictory. The empirical evidence remains problematic for several reasons: endogenous route placement; omitted variable bias; heterogeneity across different regions; various confounding factors. In this paper, we assess this impact by constructing the appropriate counterfactual in the absence of HSR services with similar GDP level and GDP trend before the debut of HSR services. The control group forms a good fit for the treatment group, and the economic performance of the control group was even slightly stronger than that of the treatment group before 2007. Using the DID method, we find the HSR network promoted local GDP by approximately 3.3 percentage points. The introduction of HSR service helped cities attract more industrial enterprises and achieve more industrial output, but its effect on the service sector was not pronounced. Our results are robust to different sample selection procedures, to the dynamic analyses, to different empirical strategies. Our study thus provides new and solid empirical support to the argument that HSR benefits local economic development.