Interconnected Cities, Integrated Markets: Exploring the Impact of Transport Networks on Labor Market Integration in the Yangtze River Delta, China

Abstract

This paper examines the impact of cities' network connections on regional labor market integration in megacity‐regions. By applying a panel model to data for the Yangtze River Delta between 2014 and 2021, we analyze the impact of transport networks on labor market integration and explore the (potential) mechanisms in terms of network externalities. Our empirical analysis suggests a positive association between connectivity in transport networks and labor market integration. We also observe evidence of indirect effects: transport networks allow cities to benefit from network externalities associated with effective labor matching, specifically by reducing geographical distance restrictions and lowering matching costs, thus contributing to the increased integration of labor markets. We reflect on the broader implications of our empirical findings for regional development strategies and discuss possible avenues for further research.