GVCs by strengthening IO linkages and fostering business interactions.

Second, this paper connects to emerging research on firm IO linkages and their effects on sourcing decisions. Most studies have relied on industry IO tables to measure these linkages. Amiti and Koning (2007), using Indonesia’s industry IO table, demonstrate that lowering upstream input tariffs leads downstream firms to increase imports and boost productivity. Similarly, Javorcik (2004), drawing on Lithuania’s IO data, find that downstream FDI generates significant positive spillovers for upstream domestic firms. More recent work, leverages granular data to trace firm-to-firm connections. Amiti and Weinstein (2011) use a unique dataset to link Japanese firms to their banks to study the effects of the health of banks providing trade finance and growth in a firm’s exports relative to its domestic sales. Kee (2015) identifies firm IO linkages between downstream exporters and local suppliers by matching names and addresses. The study reveals significant positive horizontal spillovers, known as sharedsupplier spillovers, when both FDI and domestic firms rely on common local input suppliers. AlfaroUreña et al. (2022) match tax IDs of firms in Costa Rica and show that domestic firms experience significant performance gains when they become suppliers to FDI firms. Alfaro et al. (2024) match shipment-level import data with the U.S. credit register to obtain information on importer-supplier relations at the firm level and credit relationships at the bank-firm level. Arnarson et al. (2024) analyze labor division along the supply chain for generating scale economies and productivity growth, by linking buyers and suppliers in Denmark and Sweden. Finally, a closely related study by Bernard et al. (2019) examines how HSR promotes domestic outsourcing among Japanese firms, using a detailed dataset of supplier-customer links across 800,000 firms. Complementing existing approaches, this paper introduces a straightforward method to capture firm-level IO linkages by connecting exporters to potential domestic suppliers. Moreover, the simple two-sector model provides an easy theoretical treatment of firm IO linkages through relative input prices.

This paper further expands the growing literature on the impacts of modern transportation infrastructure projects, specifically HSR, on economic development. Many recent works look specifically at the wide-ranging effects of HSR in China, on topics such as income growth (Lin, 2017; Qin, 2017), innovation (Gao and Zheng, 2020), profitability (Kuang et al., 2021), investment efficiency (Wu et al., 2022), bank loan price (Geng et al., 2023), trade credit (Ouyang et al., 2024), skill demand and inequality (Xu and Hu, 2024). Besides these firm-level analyses, Fang et al. (2023) show the entry of HSR leads to significant reductions in airlines travel delays, while Lin et al. (2023) find that connection to the HSR increases intercity investment. Beyond China, Charnoz et al. (2018) show that HSR enables firms in France to outsource more to their remote affiliates, while Bernard et al. (2019) shows that firms in Japan are more inclined to outsource production tasks to other firms connected via HSR. Gumpert et al. (2022) show that in Germany, HSR enhances the circulation of managers, which not only improves information transmission but also increases monitoring efficiency. Most of these studies look at the role of HSR in improving the exchange and acquisition of information, as well as in reducing logistics and communication costs. Complementing these findings, this paper provides 5