Pain or gain? The effects of transportation infrastructure on labor costs in China 1

Huan Dou, Xinyuan Pang, Huan Ke and Yuanyuan Liu

International Review of Economics & Finance, 2024, vol. 91, issue C, 413-431

Abstract: Using the introduction of high-speed rail (HSR) in Chinese cities as an exogenous shock, we find that improved transportation infrastructure connectivity increases the labor costs of listed companies in peripheral cities and that this effect is more pronounced for non-state-owned (vs. state-owned) enterprises and firms with a higher growth rate. We find two channels for the effect: an increase in labor demand and a decrease in labor supply. In addition, increased labor costs, accompanied by improved profitability, indicate that the HSR introduction promotes firms’ long-term development. Our study highlights the importance of the construction of transportation infrastructure for labor costs and firm development.

Keywords: Transportation infrastructure; Peripheral cities; Labor cost; Labor market; Population movement (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:91:y:2024:i:c:p:413-431

DOI: 10.1016/j.iref.2024.01.043

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