How does spatial proximity to the high-speed railway system affect inter-city market segmentation in China: a spatial panel analysis

The construction of the high-speed railway (HSR) system in China has improved cities' interconnectedness. We contend that the improved interconnectedness will likely strengthen economic interaction among cities, particularly cross-border trade integration. Employing a spatial panel fixed effect error model with prefecture-level city data from 2008 to 2013, this paper evaluates how cities' proximity to the HSR system affects urban market integration in China. We find that cities' proximity to the HSR system exerts a positive influence on reducing market segmentation,ceteris paribus. This study for the first time assesses the impacts of cities' proximity to HSR on inter-city market integration in China. The study will facilitate proactive regional policy decisions related to the future development of HSR and other critical infrastructure investment and development. Results obtained from the study could be of broader impact on policies of marketization reform and development for Eurasian countries.