Transport improvement, agglomeration effect and urban productivity: The case of Chinese cities

Abstract

Improvement in the transport sector will increase accessibility to economic activities, which in turn benefit urban productivity by enabling agglomeration economies. This paper aims to establish the link between agglomeration effect and wider economic benefits of transport, and test the magnitude of city-level agglomeration elasticity in China. Based on the measure of effective employment density, this paper finds that a doubling of effective density will improve the productivity in urban areas by 10.9 percent. Agglomeration elasticities vary across different regions. With improvements in transport conditions, the agglomeration elasticity on productivity will increase, but will reach a threshold value of around 17.010.