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Agglomeration and firm-level productivity : a Bayesian spatial approach

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  • Hashiguchi, Yoshihiro
  • Tanaka, Kiyoyasu

Abstract

This paper estimates the impact of industrial agglomeration on firm-level productivity in Chinese manufacturing sectors. To account for spatial autocorrelation across regions, we formulate a hierarchical spatial model at the firm level and develop a Bayesian estimation algorithm. A Bayesian instrumental-variables approach is used to address endogeneity bias of agglomeration. Robust to these potential biases, we find that agglomeration of the same industry (i.e. localization) has a productivity-boosting effect, but agglomeration of urban population (i.e. urbanization) has no such effects. Additionally, the localization effects increase with educational levels of employees and the share of intermediate inputs in gross output. These results may suggest that agglomeration externalities occur through knowledge spillovers and input sharing among firms producing similar manufactures.

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File URL: http://ir.ide.go.jp/dspace/bitstream/2344/1230/1/ARRIDE_Discussion_No.403_hashiguchi.pdf
File Function: First version, 2013
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Bibliographic Info

Paper provided by Institute of Developing Economies, Japan External Trade Organization(JETRO) in its series IDE Discussion Papers with number 403.

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Date of creation: Mar 2013
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Publication status: Published in IDE Discussion Paper. No. 403. 2013.3
Handle: RePEc:jet:dpaper:dpaper403

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Related research

Keywords: China; Industrial policy; Manufacturing industries; Productivity; Local economy; Agglomeration economies; Spatial autocorrelation; Bayes; Chinese firm-level data; GIS;

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References

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  1. Rosenthal, Stuart S. & Strange, William C., 2001. "The Determinants of Agglomeration," Journal of Urban Economics, Elsevier, vol. 50(2), pages 191-229, September.
  2. MARTIN, Philippe & MAYER, Thierry & MAYNERIS, Florian, . "Spatial concentration and plant-level productivity in France," CORE Discussion Papers RP -2273, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. G�ran Therborn & K.C. Ho, 2009. "Introduction," City, Taylor & Francis Journals, vol. 13(1), pages 53-62, March.
  4. Michael Greenstone & Richard Hornbeck & Enrico Moretti, . "Identifying Agglomeration Spillovers: Evidence from Winners and Losers of Large Plant Openings," Working Paper 17740, Harvard University OpenScholar.
  5. Glenn Ellison & Edward L. Glaeser & William R. Kerr, 2007. "What Causes Industry Agglomeration? Evidence from Coagglomeration Patterns," Harvard Business School Working Papers 07-064, Harvard Business School.
  6. Ciccone, Antonio & Hall, Robert E, 1996. "Productivity and the Density of Economic Activity," American Economic Review, American Economic Association, vol. 86(1), pages 54-70, March.
  7. Marius BRÜLHART & Federica SBERGAMI, 2008. "Agglomeration and Growth : Cross-Country Evidence," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 08.04, Université de Lausanne, Faculté des HEC, DEEP.
  8. Eberts, Randall W. & McMillen, Daniel P., 1999. "Agglomeration economies and urban public infrastructure," Handbook of Regional and Urban Economics, in: P. C. Cheshire & E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 3, chapter 38, pages 1455-1495 Elsevier.
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  10. Richard Baldwin & Toshihiro Okubo, 2005. "Heterogeneous Firms, Agglomeration and Economic Geography: Spatial Selection and Sorting," NBER Working Papers 11650, National Bureau of Economic Research, Inc.
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  12. Greenstone, Michael & Hornbeck, Richard A. & Moretti, Enrico, 2010. "Identifying Agglomeration Spillovers: Evidence from Winners and Losers of Large Plant Openings," Scholarly Articles 11185831, Harvard University Department of Economics.
  13. Hashiguchi, Yoshihiro & Chen, Kuang-hui, 2012. "Assessing agglomeration economies in the Yangzi River Delta, China : a bayesian spatial econometric approach," IDE Discussion Papers 339, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  14. Vernon Henderson, 2001. "Marshall's Scale Economies," Working Papers 01-17, Center for Economic Studies, U.S. Census Bureau.
  15. Brülhart, Marius & Mathys, Nicole A., 2008. "Sectoral agglomeration economies in a panel of European regions," Regional Science and Urban Economics, Elsevier, vol. 38(4), pages 348-362, July.
  16. Melo, Patricia C. & Graham, Daniel J. & Noland, Robert B., 2009. "A meta-analysis of estimates of urban agglomeration economies," Regional Science and Urban Economics, Elsevier, vol. 39(3), pages 332-342, May.
  17. MORIKAWA Masayuki, 2008. "Economies of Density and Productivity in Service Industries: An Analysis of Personal-Service Industries Based on Establishment-Level Data," Discussion papers 08023, Research Institute of Economy, Trade and Industry (RIETI).
  18. Diego Puga, 2010. "The Magnitude And Causes Of Agglomeration Economies," Journal of Regional Science, Wiley Blackwell, vol. 50(1), pages 203-219.
  19. Thomas J. Holmes, 1995. "Localization of industry and vertical disintegration," Staff Report 190, Federal Reserve Bank of Minneapolis.
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Cited by:
  1. Yang, Chih-Hai & Lin, Hui-Lin & Li, Hsiao-Yun, 2013. "Influences of production and R&D agglomeration on productivity: Evidence from Chinese electronics firms," China Economic Review, Elsevier, vol. 27(C), pages 162-178.

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