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Vertical Industry Relations, Spillovers and Productivity: Evidence from Chilean Plants

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  • López, Ricardo A.

    ()
    (Indiana University)

  • Suedekum, Jens

    ()
    (Heinrich Heine University Düsseldorf)

Abstract

We use disaggregated data on Chilean plants, and the Chilean input-output table to examine the impact of agglomeration spillovers on total factor productivity (TFP). In common with previous studies, we find evidence of intra-industry spillovers, but no evidence of cross-industry spillovers in general. This picture changes, however, when we take vertical industry relations into account. We find important productivity spillover effects from plants in upstream industries. Interestingly, a similar effect cannot be found from plants in downstream industries. The number of plants in these sectors has no effect on firm level TFP, just as the number of plants in other industries that are neither important upstream suppliers nor downstream customers also has no effect. Agglomeration effects are stronger for small than for large plants.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3047.

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Length: 28 pages
Date of creation: Sep 2007
Date of revision:
Publication status: published in: Journal of Regional Science, 2009, 49 (4), 721-747
Handle: RePEc:iza:izadps:dp3047

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Keywords: productivity; agglomeration; vertical linkages; Chile;

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  1. Lisa A. Cameron & Mary Amiti, 2004. "Economic Geography and Wages," Econometric Society 2004 Australasian Meetings 253, Econometric Society.
  2. Stuart S. Rosenthal & William C. Strange, 2003. "Geography, Industrial Organization, and Agglomeration," Center for Policy Research Working Papers 56, Center for Policy Research, Maxwell School, Syracuse University.
  3. Rosenthal, Stuart S. & Strange, William C., 2004. "Evidence on the nature and sources of agglomeration economies," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 49, pages 2119-2171 Elsevier.
  4. J. Vernon Henderson & Ari Kuncoro & Matthew Turner, 1992. "Industrial Development in Cities," NBER Working Papers 4178, National Bureau of Economic Research, Inc.
  5. Roberto Alvarez & Ricardo López, 2005. "Exporting and performance: evidence from Chilean plants," Canadian Journal of Economics, Canadian Economics Association, vol. 38(4), pages 1384-1400, November.
  6. Thomas J. Holmes, 1999. "Localization Of Industry And Vertical Disintegration," The Review of Economics and Statistics, MIT Press, vol. 81(2), pages 314-325, May.
  7. Giles Duranton & Diego Puga, 2003. "Micro-Foundations of Urban Agglomeration Economies," NBER Working Papers 9931, National Bureau of Economic Research, Inc.
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