This paper examines the effect of access to transportation networks on regional economic outcomes in China over a 20-year period of rapid income growth. It addresses the issue of endogenous placement of networks by exploiting the fact that these networks tend to connect historical cities. The results show that proximity to transportation networks has a moderate positive causal effect on per capita GDP levels across sectors, but no effect on per capita GDP growth. A simple theoretical framework is provided to interpret these results, suggesting that factor mobility plays an important role in determining the economic benefits of infrastructure development. The study uses county-level economic data from China to analyze the causal effect of access to transportation infrastructure on economic performance. The paper identifies areas close to historical transportation corridors and compares them to areas further away. The results show that being close to the line had a positive level effect, with higher per capita GDP in places closer to the line. However, the effect is not large, and there is no significant effect on growth rates. The findings are consistent with the view that transportation infrastructure by itself does not do very much, excepting where there was already a demand for it. However, the paper also considers an alternative interpretation, suggesting that the measured benefits of infrastructure may be small due to limited factor mobility. The study finds that capital is less mobile than goods, which means that even distant places retain high levels of capital. This results in relatively small productivity differences and equal gains from China's integration into world markets. The paper also discusses the role of factor mobility in economic development, noting that labor is assumed to be completely immobile while capital is assumed to move at a cost. The study finds that inequality is higher in better connected areas, which is consistent with the assumption that capital moves from less connected areas to better connected ones. The paper concludes that transportation infrastructure can have a positive effect on economic growth, but the extent of this effect depends on the starting point and the mobility of factors. The study provides evidence that transportation infrastructure can help China gain more from trade, but GDP level differences between well- and poorly connected areas can be small and there may be no differences in growth rates between the two areas.This paper examines the effect of access to transportation networks on regional economic outcomes in China over a 20-year period of rapid income growth. It addresses the issue of endogenous placement of networks by exploiting the fact that these networks tend to connect historical cities. The results show that proximity to transportation networks has a moderate positive causal effect on per capita GDP levels across sectors, but no effect on per capita GDP growth. A simple theoretical framework is provided to interpret these results, suggesting that factor mobility plays an important role in determining the economic benefits of infrastructure development. The study uses county-level economic data from China to analyze the causal effect of access to transportation infrastructure on economic performance. The paper identifies areas close to historical transportation corridors and compares them to areas further away. The results show that being close to the line had a positive level effect, with higher per capita GDP in places closer to the line. However, the effect is not large, and there is no significant effect on growth rates. The findings are consistent with the view that transportation infrastructure by itself does not do very much, excepting where there was already a demand for it. However, the paper also considers an alternative interpretation, suggesting that the measured benefits of infrastructure may be small due to limited factor mobility. The study finds that capital is less mobile than goods, which means that even distant places retain high levels of capital. This results in relatively small productivity differences and equal gains from China's integration into world markets. The paper also discusses the role of factor mobility in economic development, noting that labor is assumed to be completely immobile while capital is assumed to move at a cost. The study finds that inequality is higher in better connected areas, which is consistent with the assumption that capital moves from less connected areas to better connected ones. The paper concludes that transportation infrastructure can have a positive effect on economic growth, but the extent of this effect depends on the starting point and the mobility of factors. The study provides evidence that transportation infrastructure can help China gain more from trade, but GDP level differences between well- and poorly connected areas can be small and there may be no differences in growth rates between the two areas.