 Railway and trade in modern China: Evidence from the 1930sYibei Guo and Baomin Dong China Economic Review, 2021, vol. 69, issue C Abstract: There are controversies on the trade promoting effect of the railroad in modern times in the existing literature. We estimate the impact of the railway on domestic trade through forward linkages using an Eaton-Kortum model with county-commodity level data in Shandong and Hunan provinces in 1933. We show that the railway significantly decreased the trade cost and improved bilateral trade in Hunan and Shandong provinces. In particular, for every 10% decrease in geographical distance, the value of bilateral trade increased by 8.98%. In addition, our results on the existence of provincial border effect in Hunan and the disappearance of it in Shandong, imply that the emergence of railway contributed to the removal of provincial border effect. Furthermore, we find that counties with railway connections had higher per capita output, especially for those with a larger manufacturing sector. Our results echo those found in Andrabi and Kuehlwein (2010) and Donaldson (2018) for British India and Pérez-Cervantes (2014) for the US. Keywords: Interregional trade; Gravity model; Railway; Eaton-Kortum (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:69:y:2021:i:c:s1043951x21000791 DOI: 10.1016/j.chieco.2021.101661 Access Statistics for this article China Economic Review is currently edited by B.M. Fleisher, K. X. D. Huang, M.E. Lovely, Y. Wen, X. Zhang and X. Zhu More articles in China Economic Review from Elsevier |
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