Transportation Infrastructure And The Nexus Between Export And Domestic Sales

In August 2008,China opened the first high-speed railway "Beijing Tianjin Intercity Railway" and had realized the construction of "eight vertical and eight horizontal" high-speed railway grid Bureau within eight years.With railway speed-up repeatedly and the propose of the "Belt and Road Initiative",China has entered a new era of economic development and gradually become the leader in economic globalization.At the same time,the increasing improvement of domestic transportation infrastructure construction has a great impact on trade cost,and the economic benefits of domestic transportation infrastructure construction have attracted more and more attention.Unfortunately,the existing literature in the field of trade is mainly based on the traditional trade theoretical framework and the economic reality of developed countries.These theories treat the country as a point and regard the decision-making of firms entering into different markets as mutually independent,while neglecting the cost of domestic trade and simplifying the special institutional background of developing countries.However,in some developing countries,the nexus between firms' domestic and foreign trade is often more complicated due to institutional or policy.Therefore,how the cost of domestic trade affects the decision-making of firms' domestic and foreign sales behavior has not been well explained in the existing heterogeneity theoretical model.Whether the development of transportation infrastructure has an impact on the internal and external marketing behavior of firms,and what is the internal mechanism of the impact can not be reflected in these models.This paper discusses the nexus between firms' domestic and foreign trade from the view of transportation infrastructure based on the framework of iceberg transport costs of New Economic Geography(NEG)introduced into the classical heterogeneous firm trade model.Considering the domestic trade cost and the international trade cost,this paper reveals the mechanism of transportation infrastructure affecting the nexus between firms' domestic and foreign trade.The study finds that domestic transport infrastructure has dual effect on the nexus between firms' domestic and foreign trade.On the one hand,the improvement of transport infrastructure level will improve the terms of trade and promote the development of international trade.On the other hand,the improvement of transport infrastructure level will reduce the domestic transport cost and promote the development of domestic trade.Therefore,the relative magnitude of these two effects determines the overall of domestic transport infrastructure impactingon the nexus between firms' domestic and foreign trade.Through merging the Chinese Industrial Enterprises Database(CIED)with the infrastructure data,this paper empirically-estimates the impact of transportation infrastructure on the nexus between domestic and foreign trade in heterogeneous firms.The empirical results prove that the upgrading of transport infrastructure will generally enhance the substitution nexus between firm's domestic sales and export sales,and this effect is also significant reflected in coastal areas and those in inland areas closer to the coast.But in inland areas farther away from the coast,the improvement of transportation infrastructure will weaken the substitution nexus between firm's domestic sales and export sales.