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Transportation infrastructure, competition and productivity: Theory and evidence from China

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  • Liu, Chong
  • Wang, Wei
  • Wu, Qunfeng

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.

Suggested Citation

  • Liu, Chong & Wang, Wei & Wu, Qunfeng, 2019. "Transportation infrastructure, competition and productivity: Theory and evidence from China," Economics Letters, Elsevier, vol. 174(C), pages 74-77.
    • Handle: RePEc:eee:ecolet:v:174:y:2019:i:c:p:74-77
    DOI: 10.1016/j.econlet.2018.10.023
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    References listed on IDEAS

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    More about this item

    Keywords

    Transportation infrastructure; Cournot competition; Productivity; Markup; Market access;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade

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