Infrastructure, financial access, and economic growth: evidence from a quasi-experiment in China

This article investigates the impact of transportation infrastructure projects on industrial growth and how the financial sector evolves accordingly to facilitate growth by leveraging a large-scale quasi-experiment that expands the highway network substantially in China. We find that the highway network improvements significantly promote county-level manufacturing value-added, especially for those industries with higher external financial dependence. Further analyses depict a previously neglected channel that road expansion induces geographical expansion of joint-equity commercial banks, which provide additional loans to financially constrained firms that grow by building up their leverage.