“Ghost Cities” versus Boom Towns: Do China’s HSR New Towns Thrive?

Abstract In China, local governments often build “new towns” far from the city center but close to new high-speed rail (HSR) stations. While some HSR new towns experience economic growth, others have been vacant for years and become “ghost cities.” This study explores the determinants of this heterogeneity. Using satellite imagery and online archives of government documents, we identify 180 HSR new towns. We use several datasets to measure local economic growth at a fine spatial scale. Building on the recent economic geography literature, we implement an instrumental variable strategy and a difference-in-differences approach that estimates the treatment effect with counterfactual locations to study how the creation of a new HSR station stimulates local economic growth. We find that the location and local market access are key determinants of the success of new towns. “Ghost cities” are more likely to emerge if the new stations are located too far from the existing city center or the city itself has weak market access.