Transportation Infrastructure, Competition and Productivity: Theory and Evidence from China

17 Pages Posted: 22 Apr 2018

See all articles by Chong Liu

Chong Liu

Peking University

Wei Wang

University of International Business and Economics (UIBE) - School of International Trade and Economics

Qunfeng Wu

Peking University - School of Economics

Date Written: April 19, 2018

Abstract

This paper investigates the impacts of transportation infrastructure expansions on firm productivity and productivity gaps between the private and state sectors in China. Heterogeneous firms compete strategically a la Cournot in a multi-region model of internal trade. We show that lower transportation costs generate stronger selection and higher productivity by triggering fiercer competition. State-owned enterprises, however, are less affected, resulting in a higher productivity gap between private and state firms. Our theoretical results are consistent with empirical findings from China.

Keywords: Transportation Infrastructure, Cournot Competition, Productivity, Markup, Market Access

JEL Classification: F1

Suggested Citation

Liu, Chong and Wang, Wei and Wu, Qunfeng, Transportation Infrastructure, Competition and Productivity: Theory and Evidence from China (April 19, 2018). Available at SSRN: https://ssrn.com/abstract=3166871 or http://dx.doi.org/10.2139/ssrn.3166871

Chong Liu (Contact Author)

Peking University ( email )

5 Yiheyuan Road, Haidian District
Beijing, Beijing 100871
China

Wei Wang

University of International Business and Economics (UIBE) - School of International Trade and Economics ( email )

10 East Huixin Street
Chaouang District
Beijing, 100029
China

Qunfeng Wu

Peking University - School of Economics ( email )

Beijing
China

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