Railways and the Local Economy: Evidence from Qingzang Railway

Abstract

This paper empirically examines the causal effect of railway infrastructure on local economic development using the construction of Qingzang railway as a natural experiment. We apply the difference-in-difference method and find that the Qingzang railway significantly stimulated the economy of the counties along its path (railway counties). The local GDP per capita increased by about 33% after the railway had begun to operate. The effect manifested primarily through the positive railway effect on manufacturing industry. In addition, the effect did not vary significantly with the initial economic status of the railway counties. The GDP per capita of the off-railway counties that are adjacent to the railway counties was not significantly affected.

Keywords: Transportation Investment, Railway Infrastructure, Economic Development, Qingzang Railway, China

JEL Classification: R11, H54, O22