Domestic railroad infrastructure and exports: Evidence from the Silk Route

- I examine the impact of railroad speed enhancement and capacity expansion project on China's exports to Central Asia.
- I investigate the impact of transport infrastructure on exports from the perspective of non-monetary freight costs.
- Exports freighted on the upgraded rail lines increased in value by around 30%, compared with other freight modes.
- Domestic accessibility improvement leads to a spatial reorganization of exporting activities among regions within a country.

By exploiting a quasi-experiment affecting only non-monetary transport cost, this study tests the impact of an exogenous railroad speed enhancement and capacity expansion project (RSCP) on China's exports to Central Asia. The Longhai and Lanxin lines in China, linking the East and the West, were upgraded on October 21, 2000, improving freight efficiency between Eastern China and Xinjiang, the gateway from China to Central Asia. By employing a transaction-level export database, empirical results find that exports freighted on the upgraded rail lines increased in value by approximately 30%, compared with other freight modes. The results are robust by excluding specific observations with respect to the demand fluctuations and macroeconomic shocks, and including additional controls. The intensive margin, but not the extensive margin, played a major role in explaining the impact of railroad upgrades on exports. In addition, the project caused spatial reorganization in exporting activities. The share of Xinjiang exporters in the Central Asia market shrank, while Xinjiang's exports to other international markets expanded through better accessibility to the coast.