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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. Michael Greenstone & Richard Hornbeck & Enrico Moretti, 2010. "Identifying Agglomeration Spillovers: Evidence from Winners and Losers of Large Plant Openings," Journal of Political Economy, University of Chicago Press, vol. 118(3), pages 536-598, 06.
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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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