Impact of high speed trains on firm productivity..

As India moves towards the High speed Bullet trains, one needs to see all kinds of evidence.

In this article Andrew B. Bernard, Andreas Moxnes, Yukiko Umeno Saito show how the high speed link improved firm productivity in a Japanese location. They show firm productivity improved more so for input intensive industries:

Investment in high-speed rail accounts for billions in investment worldwide, but little research has been done on its effect on firm performance. This column introduces a model of firm supply networks, and presents evidence from the opening of an extension to the Shinkansen railway in Japan. The authors show that input-intensive industries benefit relatively more. In addition, their model provides a microfoundation for differential productivity across regions.

To examine the predictions of the model we use the 2004 opening of the southern portion of the high-speed rail lines in Japan (Kyushu Shinkansen) as a quasi-natural experiment. The new rail link lowered travel time between major cities by up to 75%. We examine whether firms near new Shinkansen stations improved their performance after the opening. Figure 1 shows localities near the new Shinkansen stations. We find that sales and measured productivity rose substantially for firms near the new stations after the opening.  Firms in industries with greater purchased input shares outperformed firms in industries with lower purchased input shares.

We draw on a second cross-section of the Japanese production network in 2010 to examine whether firms in localities near the new stations increased their number of suppliers and the number of source locations more than did firms in localities that did not become better connected with the high-speed rail extension. The results show support for the mechanisms emphasised in the model; the number of connections and the number of source locations both increased for firms near the new stations.

Our research lies at the intersection of work on the determinants of domestic and foreign sourcing, the variation in economic activity across locations, and the role of geography in firm performance.  The findings suggest an important role for enhanced transport infrastructure in facilitating face-to-face interactions and improved matching between suppliers and customers.

 

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