Does High-Speed Rail Generate an Equal Distribution of Economy?

Introduction

Since the first introduction of high-speed rail (HSR), it is believed that it can be a stimulus for the economic growth and mobility between cities in the regional and national scale. In fact, most countries that invested in the construction of HSR gain a huge amount of return in the form of economic growth and GDP. However, some researchers suggest that this growth benefit is not equally distributed. Cities that are not connected to the HSR network could have an economic slowdown. Thus, HSR could create a bigger disparity between localities and not create an equal distribution of economy (Diao, 2018).

A large amount of study has been conducted to explore the relationship between HSR, urbanisation, and economy. The research so far can be categorised into three focus scopes: inter-city relationships and its implications (Garmendia, Ribalaygua, & Urena, 2012) (Garmendia, Romero, Urena, & et al., 2012) (Dai, Xu, & Wang, 2018) (Lin, 2017) (Monzon, Ortega, & Lopez, 2013); role of HSR in intermediate stations (Vickerman, 2015) (Ke, Chen, Hong, & Hsiao, 2017) (Yin, Bertolini, & Duan, 2015) (Okabe, 1980) (Urena, Menerault, & Garmendia, 2009); and economic impacts along the line (Jia, Zhou, & Qin, 2017) (Diao, 2018) (Chen & Haynes, 2017) (Cheng, Loo, & Vickerman, 2015) (Vickerman, 2018). A question arises on which way the HSR will benefit and distribute the economic potential of a city and region. To address this question, existing works of literatures will be reviewed. First, how HSR can increase or worsen the economic growth. Second, how HSR integrates with intermediate areas. Lastly, how cities with no HSR station would be affected.

High-speed rail as an economic stimulant

HSR has become a catalyst for economic growth. In China, Jia et al. (2017) argue that HSR can shorten travel times between cities and thus creating a new economic spine of China. They also state that HSR could bring a positive impact on economic growth and will effectively drive the reshaping of China’s spatial economy. Moreover, cities with a higher level of economic activity and population bases like Beijing and Shanghai are the most favourable for the planning decision as per feasibility and investment return reason (Diao, 2018) (Jia et al., 2017) (Chen & Haynes, 2017). Accordingly, existing economic condition of the cities is one of the most feasible rationales behind the location and line decision of HSR.

Once the HSR is built, it can accelerate the process of urbanisation and produce a positive economic growth in major cities (Jia et al., 2017) (Diao, 2018) (Dai et al., 2018) (Cheng et al., 2015) (Urena et al., 2009). Besides that, Lin (2017) found that HSR is likely to trigger speculative acts, which in China, for example, private investments around the HSR stations and lines have already been taking place even before the official opening of the HSR operation. Moreover, HSR increases the number of accessibilities to cities within the line and gives opportunity for industries to grow and expand (Dai et al., 2018). However, in his research, Vickerman (2018) argues that accessibility could affect the optimal localisation preference of activities as response to a lower cost of transport and thus create an agglomeration. Hence, this agglomeration effect would generate disparity between places and lead to a faster growth of employment in some areas and slower growth in others. Similarly, Lin (2017) also argues that HSR compress travel time between cities and increase accessibility. As a response, firms then are more willing to locate their headquarters and research and development centres in major cities with a huge supply of more talented employees rather than in smaller cities that have a lesser local endowment.

Intermediate areas

Studies have investigated the effect of HSR to suburban or intermediate areas. These include the benefits and drawbacks that HSR brings to those areas. In this article, factors that lead to the effect of HSR in commuting pattern between intermediate areas and major cities will be further investigated. Zheng and Kahn (2013) outlines three feasibility requirements that have to take into account before building an HSR network: (1) high population density; (2) a large number of interconnected middle cities along the HSR; lastly, (3) other current transportation systems that already have an adequate number of market which can reduce the HSR construction costs. Meanwhile, Yin et al. (2015) address three criteria to asses an HSR’s potential impact on intermediate cities: (1) city and economic size is a critical factor on how it affects the development and attractiveness of the city; (2) network location is how the city connect to other regional and city without the presence of HSR; and (3) distance from central cities is how the city could potentially attract commuting market that needs HSR as their primary daily commuting mode. Similarly, Urena et al. (2009) point out that network layout and travel-time flexibility are important to attract inter-metropolitan passengers and to assess whether it is possible to do commuting between major cities and intermediate cities or not. Interestingly, Garmendia et al. (2012) found that most people who commute using HSR are derived from other kinds of transportation such as conventional rail, bus, or private car. Unfortunately, there is no precise scientific data given for this claim.

Cities with HSR station has the traffic locational advantages which could attract advanced production factors such as talent, capital, and technology (Dai et al., 2018). However, Garmendia et al. (2012) believe that only places that already have advantages and good required characteristics (i.e. high-level professional jobs, complementary facilities such as local transport infrastructure and amenities, and a shorter distance to the major city) would trigger outward commuting to intermediate cities. At the same time, Monzon et al. (2013) also point out that the initial accessibility and geographical position are also important to gain benefits of HSR. Jia et al. (2017) in their argument also state that existing suburbs that already have a slight difference in factor endowment with the nearby major city will generate a spill-over effect with the introduction of HSR, thus it contributes in creating a narrower gap between regions. Moreover, evidence from Zheng and Kahn (2013) shows that housing prices in cities that are close to major cities are also boosted. Nonetheless, local factor endowment is not the only factor to determine an intermediate city’s success in responding the HSR. Urena et al. (2009) suggest that a new urban district or transit-oriented development policy could also attract economic activities. In big intermediate cities such as Lille and Zaragoza, the local government takes this advantage by building a well-appointed meeting facility for professionals from major cities around it. In Japan, Okabe (1980) claims that the introduction of the Sanyo Shinkansen line brings positive economic activity along the line generated from tourism and investment in manufacturing plants. However, it is necessary to take into account that this positive multiplier effect will not occur without the effort from local government to issue policies related to tourism strategy as a response to the construction of HSR. Moreover, the localities along the line have already had all features of advanced areas compared to the less developed surrounding areas. Nevertheless, Okabe’s claim, unfortunately, does not provide with in-depth reasons of how these positive outcomes could occur.

Outward commuting happens when the intermediate or suburban areas is attractive and has all the core and complementary facilities to support economic activity, thus contributes to the distribution of economy. However, it still needs to take into calculation the opportunity cost of travelling or doing business outside the existing business centre or major city. So far, there is no current study that addresses other incorporating issue from such as housing affordability and living cost to the factors that triggered the economic growth caused by HSR. With the introduction of short-distance HSR, is it still worth to commute or move to the intermediate city?

In most cases, the introduction of HSR is most likely to bring an inward commuting, which is from intermediate or suburban areas to the major city. This has the potential to increase urbanisation and making the existing major city to expand further as the core for economic activity is still centralised in the major city. The introduction of HSR accordingly does not really help the intermediate or suburban areas. As argued by Vickerman (2015), disparities would be less effectively reduced when the development is more focused on creating a greater integration with the neighbouring metropolitan region instead of developing services across border. Cheng et al. (2015) point out the case in cities such as Paris or Madrid, which shows that decentralisation towards the metropolitan areas is the case that is likely to happen, that could lead to a higher growth rate in the core. In addition, Vickerman (2018) also agrees that centralisation and inequality between regions are the effects caused by lowering transport costs which trigger the movement towards the core. An outflow of investment thus will be perceived by small cities as it is may be more convenient to conduct economic activities in the larger city that has a better accessibility and business environment, creating a backwash-effect (Diao, 2018) (Monzon et al., 2013). However, in these research, it is also somewhat necessary to take into account some other considerations such as housing prices and the cost of commuting for commuters that live in intermediate cities.

Cities with no HSR station

A different case will exist in cities with no HSR station. Initially, HSR is believed to reduce the expansion of economic disparity in developing countries where their existing transportation infrastructure restricts cross-regional labor migration (Chen & Haynes, 2017). Meanwhile, in China, Diao (2018) points out that cities that are not connected to the HSR network are prone to have an accessibility gap and thus widened the disparity between cities that are connected and those who not. The uneven development policy also widened the gap between the prosperous eastern Chinese region that has already been wealthy and the poorer western region. Cities that are more industrialised have the capability to absorb a more positive effect of the HSR as it is able to attract more labor and thus increase their agglomeration (Ke et al., 2017). In addition, a locational quotient analysis conducted by Dai et al. (2018) shows that HSR creates in a diffusion effect on 13 subdivided industries (electricity, transportation, information transmission, wholesale accommodation, financial, real estate, scientific research, water conservation, education, health, culture, and public administration) on cities without a station. They further elaborate that advanced industries such as knowledge-intensive service industry, capital-intensive service industry, and technology-intensive industry are moving from cities without HSR station to cities with HSR station. However, there is a need for a deeper research and field data on the agglomeration, whether it is temporal because of the need for construction material and equipment for HSR (construction and manufacturing industry) or permanent move (increase in demand for construction as a multiplier effect of the agglomeration).

The reason for this move is because the increasing accessibility provided by HSR is likely to be very attractive for knowledge-based employment to be benefitted (Vickerman, 2018). Chen and Haynes (2017) elaborate further that a higher growth rate is likely to happen in regionals that have an agglomerated production as a result of the introduction of HSR, which then lead to a regional disparity. Further research conducted by Dai et al. (2018) which argue that in cities with HSR station, agglomeration effect is come to pass for industries such as: manufacturing, information transmission, financial, water conservation, real estate, scientific research, construction, public administration, health, education, and culture. Additionally, Yin et al. (2015) state that high unemployment and low office rents are the characters for cities that are not served by HSR. Accordingly, in order to compete with the bigger cities that have HSR access, the local government of cities without HSR station should quickly open and adapt their planning and economic policy, as in contrast it could hinder the potential for local development (Ke et al., 2017). Cheng et al. (2015) also affirm that HSR has the potential to reduce transportation costs. Therefore, there is a high chance of further agglomeration that will take place in core cities instead of non-HSR served cities.

Conclusions

The construction of HSR is like a double-edged sword: HSR has the potential to stimulate the growth of a city or region, but it can also worsen some of the undeveloped cities or towns. Urena et al. (2009) confirm that HSR can enhance the role of major cities by creating a closer accessibility from big intermediate cities. In Spain, for example, redistribution of economic activities among different regions is unfortunately the case rather than contribution to the overall growth of the national economy (Chen & Haynes, 2017). Similarly, HSR increases spatial imbalance and create a more polarised pattern of spatial development. As Monzon et al. (2013) point out, “richer cities are likely to gain more, while disadvantaged cities would end up in comparatively worse situation”. Garmendia et al., (2012) prove that restructuring the employment is likely to have more impact around major metropolitan areas rather than rebalancing the economy which has shown in some cases.

At the same time, it could create and enhance the growth of satellite cities which location and facilities are relatively feasible to live and commute to the major city. However, in order to stimulate local economy, better supporting infrastructure and local development policy that promote growth are very important in order to fully utilised the benefit of HSR (Ke et al., 2017) (Urena et al., 2009). Effective local political leadership is the key to determine the risk and success of how the city responds to the HSR project. At the same time, Yin et al. (2015) argue that one of the ways to help satellite cities with HSR station to boost its economy is by attracting housing investment and become a specialised sub-centers of the metropolitan area with high-level office development to reduce the necessity to commute to the metropolis. This is true as transport infrastructure has little effect to transform the economic development without any other policy interventions (Vickerman, 2018).

In the end, as HSR generates a heterogeneous effect on different location (Ke, Chen, Hong, Hsiao, 2017) (Vickerman, 2015) (Jia, Zhou, Qin, 2017) (Diao, 2018), it is challenging to examine the phenomenon as each area has its own uniqueness and special approach and purpose when building the HSR. Therefore, there is a need for more study about HSR and its effect, especially in growing developing countries and how HSR will contribute to growing cities in medium- and long-term.

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