The effect of high-speed railway connections on economic development in China's peripheral cities: A perspective of innovation capacity

The impact of high-speed railway (HSR) on the development of peripheral cities is a two-way process, yet research on this topic remains limited and yields mixed results. This paper develops a spatial general equilibrium model that incorporates labor mobility costs and regional productivity heterogeneity to analyze the relationship between HSR and the economic development of peripheral cities. By utilizing a dataset on China's HSR construction from 2003 to 2019, this study investigates the impact of HSR on peripheral cities through the perspective of innovation capacity. A difference-in-differences model is employed to explore the heterogeneous effects of HSR on these cities. The findings reveal that, on average, HSR construction does not significantly affect the economic development of peripheral cities. However, when accounting for differences in innovation capacity, peripheral cities with stronger innovation capacity are better positioned to leverage the positive effects of HSR connections. Analyzing the city-pair level data, we find that peripheral cities with higher innovation capacity experience fewer labor outflows. Our findings contribute to the existing literature on the impact of HSR connections on the economic development of peripheral cities and offer insights for local governments in making informed decisions about HSR construction and the enhancement of local innovation capacity.