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High-speed rail and inventory reduction: Firm-level evidence from China

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  • Li, Leona Shao-Zhi

    (Faculty of Business Administration, University of Macau)

  • Cui, Chuantao

    (School of Economics, Sichuan University)

Abstract

Using a balanced panel of manufacturing firms from China between 2007 and 2013, we estimate that being connected to a high-speed rail system leads to 9.5% reduction in local firms' input inventory spending. The e ect is stronger for downstream industries and private enterprises. A back-of-envelope calculation suggests that each dollar of HSR investment reduces input inventory stock by 12 cents, which is significantly larger than the e ects found in previous studies based on highway or road investment. Declines in transportation and communication cost, as well as agglomeration e ect are identified as plausible mechanisms. Our findings reveal a micro channel through which improved transport infrastructure brings about economic gains, and contribute to the cost-benefit assessment of high-speed rail investment.

Suggested Citation

  • Li, Leona Shao-Zhi & Cui, Chuantao, 2018. "High-speed rail and inventory reduction: Firm-level evidence from China," RIEI Working Papers 2018-08, Xi'an Jiaotong-Liverpool University, Research Institute for Economic Integration.
  • Handle: RePEc:xjt:rieiwp:2018-08
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    More about this item

    Keywords

    Transport infrastructure; high-speed rail; firm performance; inventory; China;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R4 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics

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