Interregional infrastructure, competition for capital, and local public expenditure policies: Evidence from China's high‐speed rail network

Abstract

Interregional infrastructure promotes market integration and enhances the mobility of capital, thereby intensifying fiscal competition among local governments. Exploiting the expansion of China's high‐speed rail (HSR) network as plausibly exogenous shocks, this study examines how Interregional infrastructure affects the fiscal competition among local governments. We find that after connecting with the HSR network, city governments tend to dedicate a lower proportion of public spending to consumption goods, which benefit immobile households, and invest more in productive inputs, which attract mobile firms. We also find that the negative effect of HSR connection on the proportion of consumption goods is more pronounced in peripheral cities than core cities because periphery cities face a larger increase in capital mobility due to the core–periphery effects of trade integration induced by HSR. Our findings indicate that the behavioural responses of local governments should be accounted for when assessing the social welfare of interregional infrastructure.

Evaluating resource utilization efficiency in urban land construction of Yangtze river economic zone under technological progress

“…However, it rarely discussed the resource efficiency problems. For example, Pu et al (2022) established a trade agglomeration model to study the welfare nature of the "core-periphery" model. Li and Li (2022) revised the model, considering the heterogeneity of workers in terms of skills and liquidity, it is easier to analyze the regional asymmetric trade cost problem.…”