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Agglomeration premium and trading activity of firms

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  • Békés, Gábor
  • Harasztosi, Péter

Abstract

While most empirical studies in economic geography document a steady and positive correlation between regional density and firm productivity, the impact is not homogeneous across firms. Importantly, recent international trade literature showed that trading firms are different in terms of workforce, size and productivity. We argue that externalities that determine density premium for firms will be affected by the firms' involvement in trade. Indeed, firms active in international trade may employ a different bundle of resources and be organized differently so that they would appreciate inputs and information in a different fashion and intensity. Using Hungarian manufacturing firm level data from 1992 to 2003 at a 150 micro-region level, we show that the elasticity of agglomeration on productivity is much larger for traders than for non-traders. As firms' trade participation is endogenous to firm performance, we offer various treatment methods of this endogeneity issue. We find that our key results are robust and well above the gap suggested by simple self-selection models.

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Bibliographic Info

Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 43 (2013)
Issue (Month): 1 ()
Pages: 51-64

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Handle: RePEc:eee:regeco:v:43:y:2013:i:1:p:51-64

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Web page: http://www.elsevier.com/locate/regec

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Keywords: Agglomeration; International trade; Firm heterogeneity;

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Blog mentions

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  1. Agglomeration premium and trading activities of firms
    by aamighini in NEP-INT blog on 2010-03-12 09:29:16
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Cited by:
  1. Sun, Churen & Tian, Guoqiang & Zhang, Tao, 2011. "When Pareto meets Melitz: the inapplicability of the Melitz-Pareto model for Chinese firms," MPRA Paper 35597, University Library of Munich, Germany.
  2. Ksenia Gonchar & Tatyana Ratnikova, 2013. "Explaining the productivity advantages of manufacturing firms in Russian urban agglomerations," ERSA conference papers ersa13p123, European Regional Science Association.
  3. Ksenia Gonchar & Tatyana Ratnikova, 2012. "Explaining the Productivity Advantages of Manufacturing Firms in Russian Urban Agglomerations," HSE Working papers WP BRP 22/EC/2012, National Research University Higher School of Economics.
  4. Sun, Churen & Yu, Zhihao & Zhang, Tao, 2012. "Agglomeration and Trade with Heterogeneous Firms," MPRA Paper 49001, University Library of Munich, Germany, revised 17 Aug 2013.

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