Can transportation infrastructure improve resource misallocation? Evidence from China

Abstract

Transportation infrastructure plays a crucial role in the free movement and rational allocation of resources. Utilizing provincial panel data from China spanning from 2000 to 2017, we employ a dynamic spatial Durbin model (DSDM) and a panel threshold model to analyze the impact of transportation infrastructure on resource misallocation. The findings are as follows: (1) Overall, transportation infrastructure serves to correct misallocations of capital and labor, exhibiting spatial effects; (2) Under the influence of spatial spillover effects, transportation infrastructure improves capital misallocation in neighboring regions, yet exacerbates labor misallocation; (3) The impact of transportation infrastructure on capital and labor misallocations shows regional heterogeneity; (4) Transportation infrastructure indirectly ameliorates resource misallocation through three pathways: opening up to external markets, urbanization, and industrial upgrading; (5) There is a threshold effect of transportation infrastructure on labor misallocation - it only improves labor misallocation when it reaches a certain scale.

Keywords

• Transportation infrastructure
• Resource misallocation
• Dynamic spatial durbin model
• Threshold effect