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The Sunday Paper – Does High-Speed Rail Really Promote Economic Growth? Evidence from China’s Yangtze River Delta Region

You’d think the answer was obvious and ‘of course!’; but you’d be wrong. Or, to be more precise, you’d be only partly correct.

Connecting one megalopolis to another is surely a net benefit to both. As soon as a plan is announced though the next question is how many stops will there be on that line and which middling cities get connected?

Anecdotal evidence (and some science based on how the routes don’t take the most direct course) suggests hard lobbying is involved by provincial worthies to make the train stop in their town because they believe this will bring prestige and, more importantly, economic growth. What the paper highlighted this week from Yanyan Gao of Southeastern University in Nanjing (et al) shows is a high speed rail (HSR) stop in a smaller town is, in fact, a ‘be careful what you wish for’ proposition. For smaller cities an HSR station actually reduces GDP.

How’s that? The researchers believe a number of factors are at work. The HSR provides an escape route for the smartest hayseeds to up and leave, which they do (it’s only a short ride home now for Sunday lunch). Moreover businesses restructure towards their competitive advantages which, in the case of smaller towns, is agriculture (tourists come from the megalopolis to pick kumquats and feed on organic hog). Another factor at work may be folk in peripheral towns can now access big-city benefits so may not want to shop in their local malls nor use so many local, and usually inferior (think medical especially), services?

The paper concludes that as HSR is still so new in China the additional benefits, as yet unseen, may have yet to fully emerge. What is in no doubt though is that provincial towns connecting to the HSR have retarded their GDP growth and these one-off losses are, in all likelihood, permanent. An inconvenient truth ambitious cadres may only just be waking up to?

The paper in full can be accessed via the following link Does High-Speed Rail Really Promote Economic Growth?

Happy Sunday.

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