The impact of Gyeongbu High Speed Rail construction on regional economic growth

Abstract

The Gyeongbu High Speed Rail (KTX) was constructed with the aim to improve people’s quality of life and for the growth of regional economies. However, contrary to expectations, there are discussions of economy being focused on metropolitan areas due to the Straw Effect. In this paper, the influence of large-scaled land development projects on local economy was analyzed through the case of KTX project. For this purpose, an empirical analysis model, which utilizes neoclassical model of economic growth and the panel data of 16 cities and provinces from 1999 to 2008 was used to make the analysis through the generalized least square method. As a result, the developed neoclassical model of economic growth proved to be useful in explaining local economic growth in Korea, and large-scale land development projects such as the KTX was found to cause negative effects on local economic growth. From this, it seems problematic to assume the construction of High Speed Rail (hereafter HSR) to be beneficial to the economy of the corresponding regions. The results should prove to be an important resource for policies regarding more efficient and balanced land development projects in the future.