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Agglomeration economies in the formal and informal sectors: a Bayesian spatial approach‡

Author

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  • Kiyoyasu Tanaka
  • Yoshihiro Hashiguchi

Abstract

This article examines whether localized clusters of similar industries produce agglomeration economies in the formal and informal sectors. We develop a Bayesian method to estimate a spatial autoregressive model with an endogenous independent variable. We use establishment-level census data that cover both formal registered and informal unregistered establishments in Cambodia. We find that the density of local employment has a significantly positive effect on productivity in the informal sector, but little effect in the formal sector. For manufacturing, a doubling of employment density increases productivity in the informal sector by 9% through local linkages and by 19% through spatial multiplier linkages, leading to a 28% increase in total. A spatial network magnifies the local impact of agglomeration economies in the informal sector.

Suggested Citation

  • Kiyoyasu Tanaka & Yoshihiro Hashiguchi, 2020. "Agglomeration economies in the formal and informal sectors: a Bayesian spatial approach‡," Journal of Economic Geography, Oxford University Press, vol. 20(1), pages 37-66.
    • Handle: RePEc:oup:jecgeo:v:20:y:2020:i:1:p:37-66.
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    File URL: http://hdl.handle.net/10.1093/jeg/lby069
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    Citations

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    Cited by:

    1. Maria Bernedo Del Carpio & Carlianne Patrick, 2021. "Agglomeration and informality: Evidence from Peruvian establishments," Journal of Regional Science, Wiley Blackwell, vol. 61(2), pages 442-471, March.
    2. Daniel Straulino & Juan C. Saldarriaga & Jairo A. G'omez & Juan C. Duque & Neave O'Clery, 2021. "Uncovering commercial activity in informal cities," Papers 2104.04545, arXiv.org.
    3. Chih, Yao-Yu & Demir, Firat & Hu, Chenghao & Liu, Junyi & Shen, Hewei, 2023. "A spatial analysis of local corruption on foreign direct investment: Evidence from Chinese cities," European Journal of Political Economy, Elsevier, vol. 79(C).
    4. Nohoua TRAORE, 2023. "La formalisation améliore-t-elle la productivité des firmes en Côte d’Ivoire ?," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 57, pages 5-27.
    5. Quintero, Luis E. & Roberts, Mark, 2023. "Cities and productivity: Evidence from 16 Latin American and Caribbean countries," Journal of Urban Economics, Elsevier, vol. 136(C).

    More about this item

    Keywords

    Agglomeration economies; informal sector; Cambodia; bayes; spatial;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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