Subway and the Diffusion of Knowledge : Evidence from China

This paper aims to examine the role of the subway network, a typical transportation way within the urban area, on innovation and knowledge diffusion. Based on the difference-in-difference strategy and spatial analysis, we use 1332 newly opened stations in China from 2000 to 2013 as a quasi-experiment to identify local effects from subway expansions. Results suggest that by reducing the communication cost and increasing the opportunity for interaction, subway construction will bring growth effect at district-level, and knowledge dissemination will become more active after new stations open. Micro-level results show that the above positive impacts are highly localized, that is, only those firms located within 1km around stations will benefit from the new subway. Moreover, the new subway will facilitate the flow of knowledge from station to station and assist firms to acquire knowledge from farther tech-cluster conveniently