Trade Integration, Market Size, and Industrialization: Evidence from China's National Trunk Highway System

Large-scale transport infrastructure investments connect both large metropolitan centres of production as well as small peripheral regions. Are the resulting trade cost reductions a force for the diffusion of industrial and total economic activity to peripheral regions, or do they reinforce the concentration of production in space? This article exploits China's National Trunk Highway System as a large-scale natural experiment to contribute to our understanding of this question. The network was designed to connect provincial capitals and cities with an urban population above 500, 000. As a side effect, a large number of small peripheral counties were connected to large metropolitan agglomerations. To address…

• IR
  Innovative Research Group Project of the National Natural Science Foundation of China
• EA
  Economic and Social Research Council

  Award: ES/H02123X/1