High-Speed Railway and Firm Innovation: Evidence from DID Method

Ji Yun (吉赟)1 and Yang Qing (杨青)2*

1 Business School, East China University of Political Science and Law (ECUPL), Shanghai, China

2 School of Economics, Fudan University, Shanghai, China

Abstract: With the launch of high-speed railways as a natural experiment, this paper finds that firms along the route became much more innovative after a high-speed railway was put into use, as reflected by the robust growth in patent licenses and applications, especially invention patents. From a dynamic view, high-speed railways’ effects on firm patents increased over the years with a one-year lag in the effect on patent licenses relative to the effect on patent applications. This lag of impact reflects the normal cycle of firm innovation. Furthermore, our survey on the employees’ education level at firms along the route verified that the inflow of skilled workforce helped firms innovate. After a high-speed railway was put into service, firms along the route saw a sharp rise in the percentage of college-educated personnel, most of whom were employed at technical positions. High-speed railways contributed more to the innovation output of firms in medium-sized and large cities and within innovation-oriented firms. This paper has enriched relevant research on the drivers of firm innovation and the economics of high-speed railways.

Keywords: high-speed railway, firm innovation, talent migration, Difference-in- Differences (DID)

JEL Classification Codes: G30, J10, O31

DOI: 10.19602/j.chinaeconomist.2021.03.05