Advanced Search
MyIDEAS: Login to save this paper or follow this series

Agglomeration and Markup

Contents:

Author Info

  • Lu, Yi
  • Tao, Zhigang
  • Yu, Linhui

Abstract

Agglomeration brings costs (e.g., intensified local competition) as well as benefits (e.g., knowledge spillover). It is important to examine the net impact of agglomeration to understand the geographic distribution of economic activities. In this study, we use firm markup (defined as the ratio of price over marginal cost) to capture the net impact of agglomeration. Using data from Chinese manufacturing firms in the 1998-2005 period, we first recover the markup ratio for each firm following De Locker and Warzynski (2012), and then use changes in industrial affiliation as a quasi-experiment to identify the impact of agglomeration on firm markup. Our difference-in-differences (DID) estimation shows that agglomeration has a negative impact on firm markup, suggesting that the devastating competition effect dominates the beneficial spillover effect in Chinese context. Moreover, we find that the impact of agglomeration on firm markup varies across different industries and types of firms.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://mpra.ub.uni-muenchen.de/38974/
File Function: original version
Download Restriction: no

Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 38974.

as in new window
Length:
Date of creation: Jun 2011
Date of revision: May 2012
Handle: RePEc:pra:mprapa:38974

Contact details of provider:
Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC

Related research

Keywords: Agglomeration; Firm Markup; Difference-in-Differences Estimation; Spillover effect; Competition effect;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. G. Steven Olley & Ariel Pakes, 1992. "The Dynamics of Productivity in the Telecommunications Equipment Industry," NBER Working Papers 3977, National Bureau of Economic Research, Inc.
  2. Ackerberg, Daniel & Caves, Kevin & Frazer, Garth, 2006. "Structural identification of production functions," MPRA Paper 38349, University Library of Munich, Germany.
  3. Glenn Ellison & Edward L. Glaeser, 1994. "Geographic Concentration in U.S. Manufacturing Industries: A Dartboard Approach," NBER Working Papers 4840, National Bureau of Economic Research, Inc.
  4. Yuanzheng Cao & Yingyi Qian & Barry R. Weingast, 1997. "From Federalism, Chinese Style, to Privatization, Chinese Style," Working Papers 97049, Stanford University, Department of Economics.
  5. Evgeny Zhelobodko & Sergey Kokovin & Mathieu Parenti & Jacques-François Thisse, 2011. "Monopolistic Competition in General Equilibrium: Beyond the CES," Discussion Paper Series DP2011-16, Research Institute for Economics & Business Administration, Kobe University.
  6. Roeger, Werner, 1995. "Can Imperfect Competition Explain the Difference between Primal and Dual Productivity Measures? Estimates for U.S. Manufacturing," Journal of Political Economy, University of Chicago Press, vol. 103(2), pages 316-30, April.
  7. OTTAVIANO, Gianmarco & TABUCHI , Takatoshi & THISSE, Jacques-François, . "Agglomeration and trade revisited," CORE Discussion Papers RP -1553, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Jozef Konings & Patrick Van Cayseele & Frederic Warzynski, 2005. "The Effects of Privatization and Competitive Pressure on Firms' Price-Cost Margins: Micro Evidence from Emerging Economies," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 124-134, February.
  9. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
  10. Ottaviano, Gianmarco & Melitz, Marc, 2008. "Market Size, Trade, and Productivity," Scholarly Articles 3229096, Harvard University Department of Economics.
  11. Jan De Loecker & Frederic Warzynski, 2009. "Markups and firm-level export status," NBER Working Papers 15198, National Bureau of Economic Research, Inc.
  12. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Wiley Blackwell, vol. 70(2), pages 317-341, 04.
  13. Tor Jakob Klette & Zvi Griliches, 1994. "The Inconsistency of Common Scales Estimators when Output Prices are Unobserved and Endogenous," Discussion Papers 127, Research Department of Statistics Norway.
  14. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
  15. Liu Junning, 2001. "The New Trinity: The Political Consequences of WTO, PNTR, and the Internet in China," Cato Journal, Cato Journal, Cato Institute, vol. 21(1), Spring/Su.
  16. Klette, T.J., 1998. "Market Power, Scale Economies and Productivity: Estimates from a Panel of Establishment Data," Memorandum 15/1998, Oslo University, Department of Economics.
  17. Yongmin Chen & Michael H. Riordan, 2008. "Price-increasing competition," RAND Journal of Economics, RAND Corporation, vol. 39(4), pages 1042-1058.
  18. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2002. "How Much Should We Trust Differences-in-Differences Estimates?," NBER Working Papers 8841, National Bureau of Economic Research, Inc.
  19. Warzynski, Frederic, 2001. "Did tough antitrust policy lead to lower mark-ups in the US manufacturing industry?," Economics Letters, Elsevier, vol. 70(1), pages 139-144, January.
  20. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June.
  21. repec:cto:journl:v:21:y:2001:i:1:p:77-90 is not listed on IDEAS
  22. Galina Hale & Cheryl Long, 2007. "Are there productivity spillovers from foreign direct investment in China?," Working Paper Series 2006-13, Federal Reserve Bank of San Francisco.
  23. 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.
  24. Ackerberg, Daniel & Lanier Benkard, C. & Berry, Steven & Pakes, Ariel, 2007. "Econometric Tools for Analyzing Market Outcomes," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 6, chapter 63 Elsevier.
  25. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
  26. J. Vernon Henderson & Ari Kuncoro & Matthew Turner, 1992. "Industrial Development in Cities," NBER Working Papers 4178, National Bureau of Economic Research, Inc.
  27. Konings, Jozef & Vandenbussche, Hylke, 2005. "Antidumping protection and markups of domestic firms," Journal of International Economics, Elsevier, vol. 65(1), pages 151-165, January.
  28. Marshall, Alfred, 1890. "The Principles of Economics," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number marshall1890.
  29. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:38974. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.