The Distributional Impacts of Transportation Networks in China

This paper evaluates the dynamic and distributional impacts of transportation networks in China. We argue that the quality of roads and railroads vary substantially over time and space, and therefore binary measures of connectivity in the literature are inadequate. Instead, we construct a new panel dataset on China’s road and railroad networks that accounts for quality differences. We measure the quality of infrastructure using the design speed that varies by vintage, rate, and the underlying terrain at the pixel level. We then build a dynamic spatial general equilibrium model that allows for multiple modes and routes of transportation and forward-looking migration to study the impacts of transportation. We show that the expansion of transportation networks significantly increases aggregate output and reduces spatial income inequality. Moreover, the return to better freight networks is high in the short-run but wanes in the long term. On the other hand, the return to better passenger networks could be negative in the short run but grows substantially over time.