Can Time-Space Compression Promote Urban Economic Growth? Evidence from China's High-speed Rail Projects

This paper studies the effect of high-speed rail (HSR) on urban economic growth using a panel data comprising 285 Chinese cities in 2007-2017. Combining the endogenous growth model with a difference-in-difference analysis, we extend the horse-mass theory to explain how China may use HSR to avoid the so-called middle-income trap. The paper also examines the efficient boundaries of HSR and simultaneously studies HSR time-space compression as well as the city neighboring effects on economic growth. It is found that HSR's efficient boundaries are within the range of 200-1,200 km for provincial capitals and 50-300 km for prefecture-level cities. HSR stimulates economic growth by approximately 0.6 percent, and the neighboring effect accounts for one-quarter of economic growth. Three policy implications are drawn: (i) China needs to further reduce the travel times between the inland provincial cities and Beijing, Shanghai or Guangzhou; (ii) China should build a denser HSR network to maximize its economic impact on the vast majority of cities; (iii) China needs to develop some powerful economic growth centers in the inland areas to lead the development of their neighboring cities.