Geographic Spillovers and Firm Exports: Evidence from China

This paper examines the importance of domestic economic geography for a country’s export performance. We first develop a simple model in which the geographic integration of exporters reduces international trade frictions. We test the model’s predictions by leveraging the expansion of China’s high-speed rail (HSR) as a quasi-experiment to provide plausibly exogenous variation in the extent of (effective) geographic integration among Chinese exporters. The analysis reveals strong evidence that the improved integration of exporters within the same sectors positively impacts a firm’s export performance, both intensively and extensively. We also provide evidence that an HSR connection strengthens knowledge spillovers among exporters to overcome frictions in accessing foreign markets.