Need for Speed: High-Speed Rail and Firm Performance
49 Pages Posted: 26 May 2020
Date Written: April 11, 2020
Exploiting the staggered expansion of China's passenger-dedicated high-speed rail (HSR) network, we study the relationship between HSR connection and firm performance through substantial reductions in communication costs. By highlighting the importance of firm location and face-to-face interactions, we test the differential impact of HSR connection on the performance and growth of firms that differ in their dependence on communication and inter-city travel as production inputs. Our results confirm that firms in communication- and travel-intensive industries benefit more from the operation of the HSR, with the effect being persistent over time. Moreover, in examining the specific mechanisms at work, we find evidence consistent with the projections that the HSR promotes the performance and growth of communication-intensive firms through productivity boosts and market expansions. We also find evidence suggesting that the degree of impact is increasing in the saving from travel time and the strength of agglomeration economies.
Keywords: communication cost, high-speed rail, firm location, firm performance
JEL Classification: G30, D22, H54
Suggested Citation: Suggested Citation