Productivity Selection, Firm Entry, and Exit across a Geographical Surface with Heterogeneous Trade Costs: Evidence from China

This paper provides a continuous interpretation of how highway expansion affects firm-level productivity and then shapes the evolution of regional productivity distribution. Results show that highway expansion increases market selection pressure, compelling less‐productive firms to exit or enhance their idiosyncratic productivity. This exit pressure narrows productivity gaps, concentrating the distribution. Cross‐prefecture comparisons suggest heightened regional disparities, possibly influenced by path dependence and agglomeration effects. Some prefectures exhibit lower market selection pressure, fostering accelerated aggregate productivity and firm quantity growth, along with increased productivity dispersion and reduced concentration.