IDEAS home Printed from https://ideas.repec.org/a/bla/ecopol/v38y2026i2p560-574.html

How Metro Expansion Influences Enterprise Labor Misallocation

Author

Listed:
  • Mengting Zhang
  • Ziwen Bao
  • Feng Yu
  • Changbiao Zhong

Abstract

This paper investigates the effect of metro expansion on enterprise labor misallocation in China, using a double machine learning (DML) model with data from A‐share listed companies from 2013 to 2022. Our findings reveal that metro expansion significantly mitigates enterprises' labor misallocation. This effect is more pronounced for labor‐intensive and state‐owned enterprises, as well as for those located in developing urban agglomerations and regions with advanced digital infrastructure. Further mechanism analysis shows that this reduction operates through two distinct channels. On the supply side, metro networks deepen the labor market, thereby improving job‐matching efficiency. On the demand side, by intensifying competition, metro expansion erodes enterprises' market power, thereby improving allocative efficiency through the realignment of wages with marginal productivity. This study provides empirical evidence at the micro level, highlighting the role of urban transit infrastructure in improving resource allocation.

Suggested Citation

  • Mengting Zhang & Ziwen Bao & Feng Yu & Changbiao Zhong, 2026. "How Metro Expansion Influences Enterprise Labor Misallocation," Economics and Politics, Wiley Blackwell, vol. 38(2), pages 560-574, July.
    • Handle: RePEc:bla:ecopol:v:38:y:2026:i:2:p:560-574
    DOI: 10.1111/ecpo.70042
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/ecpo.70042
    Download Restriction: no
    File URL: https://libkey.io/10.1111/ecpo.70042?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Yu, Li & Ma, Tiemeng & Wu, Sirong & Lyu, Zhuoyang, 2023. "How does broadband internet affect firm-level labor misallocation: The role of information frictions," China Economic Review, Elsevier, vol. 82(C).
    2. Dave Donaldson, 2018. "Railroads of the Raj: Estimating the Impact of Transportation Infrastructure," American Economic Review, American Economic Association, vol. 108(4-5), pages 899-934, April.
    3. Liu, Changqing & Li, Lei, 2020. "How do subways affect urban passenger transport modes?—Evidence from China," Economics of Transportation, Elsevier, vol. 23(C).
    4. Tian, Chuanhao & Peng, Ying & Wen, Haizhen & Yue, Wenze & Fang, Li, 2021. "Subway boosts housing values, for whom: A quasi-experimental analysis," Research in Transportation Economics, Elsevier, vol. 90(C).
    5. Shengxiao Li & Luoye Chen & Pengjun Zhao, 2019. "The impact of metro services on housing prices: a case study from Beijing," Transportation, Springer, vol. 46(4), pages 1291-1317, August.
    6. Zheng, Yilin & Lu, Ming & Li, Jiewei, 2022. "Internal circulation in China: Analyzing market segmentation and integration using big data for truck traffic flow," Economic Modelling, Elsevier, vol. 115(C).
    7. Benjamin Moll, 2014. "Productivity Losses from Financial Frictions: Can Self-Financing Undo Capital Misallocation?," American Economic Review, American Economic Association, vol. 104(10), pages 3186-3221, October.
    8. Trevor Tombe & Xiaodong Zhu, 2019. "Trade, Migration, and Productivity: A Quantitative Analysis of China," American Economic Review, American Economic Association, vol. 109(5), pages 1843-1872, May.
    9. Lei Xu & Bin Li & Chen Ma & Jingyu Liu, 2023. "Supply chain finance and firm diversification: Evidence from China," Australian Journal of Management, Australian School of Business, vol. 48(2), pages 408-435, May.
    10. Jingting Fan & Yi Lu & Wenlan Luo, 2023. "Valuing Domestic Transport Infrastructure: A View from the Route Choice of Exporters," The Review of Economics and Statistics, MIT Press, vol. 105(6), pages 1562-1579, November.
    11. Gonzalez-Navarro, Marco & Turner, Matthew A., 2018. "Subways and urban growth: Evidence from earth," Journal of Urban Economics, Elsevier, vol. 108(C), pages 85-106.
    12. Bole Zhou & Jing Ge & Pengfei Ge, 2023. "Political connections and labor investment efficiency: Evidence from China's private firms," Economics and Politics, Wiley Blackwell, vol. 35(3), pages 696-717, November.
    13. Du, Rui & Zheng, Siqi, 2020. "Agglomeration, housing affordability, and new firm formation: The role of subway network," Journal of Housing Economics, Elsevier, vol. 48(C).
    14. Zhang, Haoran, 2020. "Metro and urban growth: Evidence from China," Journal of Transport Geography, Elsevier, vol. 85(C).
    15. Molei Liu & Yi Zhang & Doudou Zhou, 2021. "Double/debiased machine learning for logistic partially linear model," The Econometrics Journal, Royal Economic Society, vol. 24(3), pages 559-588.
    16. Yang, Jui-Chung & Chuang, Hui-Ching & Kuan, Chung-Ming, 2020. "Double machine learning with gradient boosting and its application to the Big N audit quality effect," Journal of Econometrics, Elsevier, vol. 216(1), pages 268-283.
    17. Pham, Hoang, 2023. "Trade reform, oligopsony, and labor market distortion: Theory and evidence," Journal of International Economics, Elsevier, vol. 144(C).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wang, Sai & Meng, Ye & Xie, Wenwu, 2025. "Trade liberalization, road expansion, and factor market distortion," International Review of Economics & Finance, Elsevier, vol. 99(C).
    2. Qiao Wang & Xiuyan Liu & Fan Zhang & Tao Hu, 2022. "Subways and the Diffusion of Knowledge: Evidence from China," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 30(4), pages 60-99, July.
    3. Wu, Jiaxian & Liu, Xiuyan & Li, Hao, 2024. "The subway and the gender wage gap," International Review of Economics & Finance, Elsevier, vol. 94(C).
    4. Stephan Heblich & Stephen J Redding & Daniel M Sturm, 2020. "The Making of the Modern Metropolis: Evidence from London," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(4), pages 2059-2133.
    5. Cucu, Florin, 2025. "Roads, internal migration and the spatial sorting of U.S. high-skill workers," Journal of Urban Economics, Elsevier, vol. 146(C).
    6. Han, Yi & Wu, Mingqin, 2024. "Inter-regional barriers and economic growth: Evidence from China," Journal of Development Economics, Elsevier, vol. 167(C).
    7. Yu, Li & Zhao, Siyuan & Liu, Chen & Chen, Fenglan, 2025. "The acceleration and attenuation: Internet infrastructure and employment adjustment patterns," Structural Change and Economic Dynamics, Elsevier, vol. 75(C), pages 726-743.
    8. Despina Gavresi & Anastasia Litina & George Tsiachtsiras, 2022. "Railways and Roadways to Trust," Discussion Paper Series 2022_08, Department of Economics, University of Macedonia, revised Sep 2022.
    9. Kondo, Illenin O. & Li, Yao Amber & Qian, Wei, 2024. "Trade liberalization and labor monopsony: Evidence from Chinese firms," Journal of International Economics, Elsevier, vol. 152(C).
    10. Li, Bingjing & Ma, Lin, 2022. "JUE insight: Migration, transportation infrastructure, and the spatial transmission of COVID-19 in China," Journal of Urban Economics, Elsevier, vol. 127(C).
    11. Bono, Pierre-Henri & David, Quentin & Desbordes, Rodolphe & Py, Loriane, 2022. "Metro infrastructure and metropolitan attractiveness," Regional Science and Urban Economics, Elsevier, vol. 93(C).
    12. Ma, Shuang & Mu, Ren, 2025. "Digital Roots or Digital Routes? Broadband Expansion and the Rural-Urban Migration in China," IZA Discussion Papers 17752, IZA Network @ LISER.
    13. Xu, Yang & Yang, Xi, 2021. "Access to ports and the welfare gains from domestic transportation infrastructure," Journal of Urban Economics, Elsevier, vol. 126(C).
    14. Gáfaro, Margarita & Pellegrina, Heitor S., 2022. "Trade, farmers’ heterogeneity, and agricultural productivity: Evidence from Colombia," Journal of International Economics, Elsevier, vol. 137(C).
    15. Jean-Philippe Meloche & Vincent Trotignon & François Vaillancourt, 2021. "Densification ou prolongement des réseaux de transport structurants ? Une recension des écrits sur les coûts et les bénéfices attendus," CIRANO Project Reports 2020rp-28, CIRANO.
    16. Peng, Cong & Wang, Yao & Chen, Wenfan, 2024. "Roads to development? Urbanization without growth in Zambia," LSE Research Online Documents on Economics 126771, London School of Economics and Political Science, LSE Library.
    17. Hiau Looi Kee & Enze Xie & Xu,Mingzhi, 2024. "Firm Linkages and Domestic Value Added in Exports : Moving up the Global Value Chains with High-Speed Railways," Policy Research Working Paper Series 10985, The World Bank.
    18. Gao, Jiong & Ma, Shoufeng & Zou, Hongyang & Du, Huibin, 2023. "How does population agglomeration influence the adoption of new energy vehicles? Evidence from 290 cities in China," Technological Forecasting and Social Change, Elsevier, vol. 196(C).
    19. Diego Restuccia & Richard Rogerson, 2017. "The Causes and Costs of Misallocation," Journal of Economic Perspectives, American Economic Association, vol. 31(3), pages 151-174, Summer.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:ecopol:v:38:y:2026:i:2:p:560-574. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0954-1985 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.