High-speed railway, regional production networks, and spatial allocation of firms in China

In this paper, I study the effects of the construction of high-speed railway (HSR) on the spatial distribution of firms in China, from the perspectives of spatial production networks. Exploiting exogenous variations of the slope of the terrain and the distance to the historical sites, I document that the effects are twofold: First, it drives firms away from the input suppliers, leading to dispersion. Second, it moves firms toward larger market of outputs, leading to agglomeration. Thus, the net effect is muted. I use a novel quantitative model to analyze the welfare effects of HSR through these channels