Expanding Footprints: The Impact of Passenger Transportation on Corporate Locations

This paper investigates how transportation networks shape firms' geographic footprint by reducing monitoring costs of distant investments. Exploiting the staggered expansions of China's passenger high-speed rail (HSR) network, we document that the amount of intercity investment between a pair of cities increase by 45% with the introduction of an HSR line connecting the cities. We enhance the causal inference by applying high-dimensional fixed effects, and focusing on city pairs that are "accidentally" connected in the network. The HSR effect is the strongest in industries that require on-site monitoring, as well as for controlling stakes in large distant investments.

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Yatang Lin is an Assistant Professor in the Department of Economics at Hong Kong University of Science and Technology. She is also a research affiliate at Institute for Emerging Market Studies (IEMS) and Center for Economic Policy (CEP) at HKUST. Her research areas are urban economics and environmental economics. Her current research projects study the economic impacts of transportation projects and urban pollution. She received a Ph.D. in Economics from the London School of Economics.