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Transportation infrastructure, competition and productivity: Theory and evidence from China

Chong Liu, Wei Wang and Qunfeng Wu

Economics Letters, 2019, vol. 174, issue C, 74-77

Abstract: This paper investigates the impacts of transportation infrastructure expansions on firm productivity and productivity gaps between the private and state sectors in China. Heterogeneous firms compete strategically a la Cournot in a multi-region model of internal trade. We show that lower transportation costs generate stronger selection and higher productivity by triggering fiercer competition. State-owned enterprises, however, are less affected, resulting in a higher productivity gap between private and state firms. Our theoretical results are consistent with empirical findings from China.

Keywords: Transportation infrastructure; Cournot competition; Productivity; Markup; Market access (search for similar items in EconPapers)
JEL-codes: F1 (search for similar items in EconPapers)
Date: 2019
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