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

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 2012-19 saw almost 400 more county-level units connect to the HSR network. Effects on local economic activity from this substantial increase in connections to the HSR network remain contested. Some prior studies find either insignificant effects on local economic growth or even negative effects in peripheral regions. In light of this debate, we use spatial econometric models for a panel for almost 2500 county-level units to study effects of connecting to the HSR network. We especially concentrate on the 2012-19 period that has high quality night-time lights data to provide an alternative to GDP 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 address potential endogeneity of the HSR networks and connections, using an instrumental variables strategy. Across a range of specifications, we generally find that growth in local economic activity is lower following connection to the HSR network, with this effect especially apparent when using high quality night-time lights data for the 2012-19 period. Hence, expansion of the HSR network may not boost China's economic growth.