High-Speed rail and the knowledge economy: Evidence from Japan

This study investigates the impact of high-speed rail (HSR) on regional innovation through an empirical analysis that uses municipal-level panel data covering all 1,741 municipalities in Japan, and spanning the period from 1976 to 2016. The study assumes that the number of patent applications serves as a proxy for regional innovation and follows a negative binomial distribution. A difference-in-differences specification with multiple timeframes is employed for the empirical analysis. The results reveal that HSR development has had a significant positive effect on regional innovation, supporting the companion innovation hypothesis. Robustness checks, such as through combining propensity score matching and the instrumental variable methods with difference-indifferences analysis, are also conducted. The results suggest that the effect of HSR on regional innovation in small towns and villages is larger than that in large cities. This implies that interregional communication opportunities for employees could play a key role in fostering innovation in small rural areas.