The Causality Analysis between Transportation and Regional Development in City-level China

The causality between transportation and regional development has been subject to heated debates. The existing studies investigating the causality between transportation and regional development tend to utilize panel data but assume homogeneity across individuals. This paper aims to handle the problem of panel heterogeneity embedded in Granger causality between transportation and regional development in urban China. We use a panel made up of 216 city districts in China from 1994 to 2013. The homogeneous (non)causality is firstly tested in the panel data model and then heterogeneous (non)causality is further examined if the first test fails. Homogeneous causality can only be observed in coastal region while heterogeneous non-causality dominates in central, western and northeastern China. The results demonstrate 45% of bidirectional causality, 37% of unidirectional causality running from regional development to transportation, 10% of no causality and 8% of unidirectional causality from transportation to regional development in China.