Highways and firms' exports: Evidence from China

Abstract

Abstract This article investigates the impact of highway networks on Chinese firms' exports. We construct firm‐level measures of highway access using GIS information on firm locations and highway routes and adopt an instrumental variable approach to deal with the endogeneity issue. The analysis finds that improvements in highway access significantly promote firms' exports, after controlling for firm characteristics and unobservable city and industry time‐varying factors. Highway access helps firms to expand the scope of their exports and imports as well. More interestingly, the positive effects of highway access on exports are stronger for less productive firms. With greater highway access, less productive firms lower their markups while more productive firms experience an increase in average markups.

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