Road investments and inventory reduction: Firm level evidence from China
This study presents new evidence on the causal impact of transport infrastructure on the economy. In China, inventory has declined over recent decades, while the country’s road infrastructure has expanded rapidly. Building on the existing literature, we introduce new approaches, including a quasi-experiment based on differential demand for distant suppliers, to identify the causal relationship between road investments and inventory decline. Examining a large panel data set of Chinese manufacturers from 1998 to 2007, we find one dollar of road spending saves around two cents of inventory costs. This effect is non-trivial but less than that in the United States in the 1970s. Moreover, our estimates also suggest spillover effect from road investments to firms in neighboring provinces.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- World Bank, 2005. "China : Integration of National Product and Factor Markets, Economic Benefits and Policy Recommendations," World Bank Other Operational Studies 8690, The World Bank.
- Groves, Theodore & Yongmiao Hong & John McMillan & Barry Naughton, 1995. "China's Evolving Managerial Labor Market," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 873-92, August.
- Zhigang Li & Xiaohua Yu & Yinchu Zeng & Rainer Holst, 2012.
"Estimating transport costs and trade barriers in China: Direct edvidence from Chinese agricultural traders,"
1209, BBVA Bank, Economic Research Department.
- Li, Zhigang & Yu, Xiaohua & Zeng, Yinchu & Holst, Rainer, 2012. "Estimating transport costs and trade barriers in China: Direct evidence from Chinese agricultural traders," China Economic Review, Elsevier, vol. 23(4), pages 1003-1010.
- Zhigang Li & Xiaohua Yu & Yinchu Zeng & Rainer Holst, 2012. "Estimating transport costs and trade barriers in China: Direct evidence from Chinese agricultural traders," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 112, Courant Research Centre PEG.
- John G. Fernald, 1999.
"Roads to Prosperity? Assessing the Link between Public Capital and Productivity,"
American Economic Review,
American Economic Association, vol. 89(3), pages 619-638, June.
- John Fernald, 1997. "Roads to prosperity? assessing the link between public capital and productivity," International Finance Discussion Papers 592, Board of Governors of the Federal Reserve System (U.S.).
- Bai, Chong-En & Du, Yingjuan & Tao, Zhigang & Tong, Sarah Y., 2004.
"Local protectionism and regional specialization: evidence from China's industries,"
Journal of International Economics,
Elsevier, vol. 63(2), pages 397-417, July.
- Chong-En Bai & Yingjuan Du & Zhigang Tao & Sarah Y. Tong, 2003. "Local Protectionism and Regional Specialization: Evidence from China’s Industries," William Davidson Institute Working Papers Series 2003-565, William Davidson Institute at the University of Michigan.
- Catherine J. Morrison & Amy Ellen Schwartz, 1992.
"State Infrastructure and Productive Performance,"
NBER Working Papers
3981, National Bureau of Economic Research, Inc.
- Shirley, Chad & Winston, Clifford, 2004. "Firm inventory behavior and the returns from highway infrastructure investments," Journal of Urban Economics, Elsevier, vol. 55(2), pages 398-415, March.
- Qian, Yingyi & Roland, Gerard, 1998.
"Federalism and the Soft Budget Constraint,"
American Economic Review,
American Economic Association, vol. 88(5), pages 1143-62, December.
- Andrew Benito, 2005. "Financial Pressure, Monetary Policy Effects and Inventories: Firm-level Evidence from a Market-based and a Bank-based Financial System," Economica, London School of Economics and Political Science, vol. 72(286), pages 201-224, 05.
- Aschauer, David Alan, 1989.
"Is public expenditure productive?,"
Journal of Monetary Economics,
Elsevier, vol. 23(2), pages 177-200, March.
- Groves, Theodore, et al, 1994. "Autonomy and Incentives in Chinese State Enterprises," The Quarterly Journal of Economics, MIT Press, vol. 109(1), pages 183-209, February.
- Laura S. Rubin, 1991. "Productivity and the public capital stock: another look," Working Paper Series / Economic Activity Section 118, Board of Governors of the Federal Reserve System (U.S.).
- Li, Zhigang & Chen, Yu, 2013. "Estimating the social return to transport infrastructure: A price-difference approach applied to a quasi-experiment," Journal of Comparative Economics, Elsevier, vol. 41(3), pages 669-683.
- Alicia H. Munnell, 1992. "Policy Watch: Infrastructure Investment and Economic Growth," Journal of Economic Perspectives, American Economic Association, vol. 6(4), pages 189-198, Fall.
- Marvin B. Lieberman & Lieven Demeester, 1999. "Inventory Reduction and Productivity Growth: Linkages in the Japanese Automotive Industry," Management Science, INFORMS, vol. 45(4), pages 466-485, April.
- Gramlich, Edward M, 1994. "Infrastructure Investment: A Review Essay," Journal of Economic Literature, American Economic Association, vol. 32(3), pages 1176-96, September.
- Gary Jefferson & Thomas Rawski & Yifan Zhang, 2008. "Productivity growth and convergence across China's industrial economy," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 6(2), pages 121-140.
- Hay, Donald & Louri, Helen, 1994.
"Investment in Inventories: An Empirical Microeconomic Model of Firm Behaviour,"
Oxford Economic Papers,
Oxford University Press, vol. 46(1), pages 157-70, January.
- Hay, D. & Louri, H., 1991. "Investment in Inventories: An Empirical Microeconomic Model of Firm Behaviour," Economics Series Working Papers 99123, University of Oxford, Department of Economics.
- Guasch, J. Luis & Kogan, Joseph, 2001. "Inventories in developing countries : levels and determinants - a red flag for competitiveness and growth," Policy Research Working Paper Series 2552, The World Bank.
- Song, Zheng Michael & Storesletten, Kjetil & Zilibotti, Fabrizio, 2009.
"Growing like China,"
CEPR Discussion Papers
7149, C.E.P.R. Discussion Papers.
- Cuthbertson, Keith & Gasparro, David, 1993. "The Determinants of Manufacturing Inventories in the UK," Economic Journal, Royal Economic Society, vol. 103(421), pages 1479-92, November.
- Demurger, Sylvie, 2001. "Infrastructure Development and Economic Growth: An Explanation for Regional Disparities in China?," Journal of Comparative Economics, Elsevier, vol. 29(1), pages 95-117, March.
- Alan S. Blinder & Louis J. Maccini, 1991. "Taking Stock: A Critical Assessment of Recent Research on Inventories," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 73-96, Winter.
- Alicia H. Munnell, 1990. "Why has productivity growth declined? Productivity and public investment," New England Economic Review, Federal Reserve Bank of Boston, issue Jan, pages 3-22.
- Barry Naughton, 2007. "The Chinese Economy: Transitions and Growth," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262640643, June.
- Fleisher, Belton M. & Chen, Jian, 1997. "The Coast-Noncoast Income Gap, Productivity, and Regional Economic Policy in China," Journal of Comparative Economics, Elsevier, vol. 25(2), pages 220-236, October.
- Hongbin Cai & Qiao Liu, 2009. "Competition and Corporate Tax Avoidance: Evidence from Chinese Industrial Firms," Economic Journal, Royal Economic Society, vol. 119(537), pages 764-795, 04.
- Chikan, Attila, 1991. "Inventory structure in the manufacturing industry -- A cross-country comparison," International Journal of Production Economics, Elsevier, vol. 24(1-2), pages 19-27, November.
- Lu, Jiangyong & Tao, Zhigang, 2007.
"Trends and Determinants of China’s Industrial Agglomeration,"
6597, University Library of Munich, Germany.
- Lu, Jiangyong & Tao, Zhigang, 2009. "Trends and determinants of China's industrial agglomeration," Journal of Urban Economics, Elsevier, vol. 65(2), pages 167-180, March.
- John A. Tatom, 1991. "Public capital and private sector performance," Review, Federal Reserve Bank of St. Louis, issue May, pages 3-15.
- Louri, Helen, 1996. "Inventory investment in Greek manufacturing industry: Effects from participation in the European market," International Journal of Production Economics, Elsevier, vol. 45(1-3), pages 47-54, August.
When requesting a correction, please mention this item's handle: RePEc:eee:juecon:v:76:y:2013:i:c:p:43-52. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.