Need for Speed: High-Speed Rail and Firm Performance

49 Pages Posted: 26 May 2020

See all articles by Chun Kuang

Chun Kuang

University of International Business and Economics (UIBE) - School of Banking and Finance

Zijie Liu

Renmin University of China - School of Finance

Wenyu Zhu

Renmin University of China - School of Finance

Date Written: April 11, 2020

Abstract

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

Kuang, Chun and Liu, Zijie and Zhu, Wenyu, Need for Speed: High-Speed Rail and Firm Performance (April 11, 2020). Available at SSRN: https://ssrn.com/abstract=3573753 or http://dx.doi.org/10.2139/ssrn.3573753

Chun Kuang

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

No.10, Huixindong Street
Chaoyang District
Beijing, 100029
China

Zijie Liu

Renmin University of China - School of Finance ( email )

Ming De Main Building
Renmin University of China
Beijing, Beijing 100872
China

Wenyu Zhu (Contact Author)

Renmin University of China - School of Finance ( email )

59 Zhongguancun Street
Beijing, 100872
China

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