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Testing Urbanization Economies In Manufacturing Industries: Urban Diversity Or Urban Size?

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  • Shihe Fu
  • Junjie Hong

Abstract

Whether urbanization economies stem from urban diversity or urban scale is not clear in the literature. This paper uses the 2004 China manufacturing census data and tests simultaneously the effects of urban size and industrial diversity on firm productivity, controlling for localization economies and human capital externalities. We find that productivity increases with city size—but at a diminishing rate, and the city size effect becomes negative for cities with population over two million. Firms also benefit from industrial diversity, and the strength of such benefit increases with city size but decreases with firm size. The characteristics of agglomeration economies in a transition economy are also discussed.
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Suggested Citation

  • Shihe Fu & Junjie Hong, 2011. "Testing Urbanization Economies In Manufacturing Industries: Urban Diversity Or Urban Size?," Journal of Regional Science, Wiley Blackwell, vol. 51(3), pages 585-603, August.
    • Handle: RePEc:bla:jregsc:v:51:y:2011:i:3:p:585-603
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    Cited by:

    1. Darima Zhenskhan & Onggarbek Alipbeki & Song Soo Lim & Jumi Song & Aida Balkibayeva & Anar Nukesheva & Raushan Mussina & Gauhar Mussaif, 2025. "Exploring latent dimensions of in situ urbanization in northern rural Kazakhstan through structural equation modeling," Asia-Pacific Journal of Regional Science, Springer, vol. 9(2), pages 329-355, June.
    2. Qing Liu & Jian Wang, 2022. "Spatial agglomeration and firm productivity: Does trade status matter?," Regional Science Policy & Practice, Wiley Blackwell, vol. 14(S2), pages 5-18, November.
    3. Shiwen Liu & Hongyuan Li, 2020. "Does Financial Development Increase Urban Electricity Consumption? Evidence from Spatial and Heterogeneity Analysis," Sustainability, MDPI, vol. 12(17), pages 1-17, August.
    4. Park, Jeong-Il, 2020. "Industrial diversity in building units and factors associated with diversity: A case study of the Seoul Metropolitan Area," Research Policy, Elsevier, vol. 49(5).
    5. Jordi Jofre-Monseny & Raquel Marín-López & Elisabet Viladecans-Marsal, 2014. "The Determinants Of Localization And Urbanization Economies: Evidence From The Location Of New Firms In Spain," Journal of Regional Science, Wiley Blackwell, vol. 54(2), pages 313-337, March.
    6. Cui Zhang, 2016. "Agglomeration of knowledge intensive business services and urban productivity," Papers in Regional Science, Wiley Blackwell, vol. 95(4), pages 801-818, November.
    7. Zhi Li & Chengri Ding & Yi Niu, 2019. "Industrial structure and urban agglomeration: evidence from Chinese cities," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 63(1), pages 191-218, August.
    8. Fukui, Shinya & Anh Luong, Dung, 2024. "Impact of diseconomy of mixed land-use on factory land redevelopment in large urban area: Evidence from Japan," Japan and the World Economy, Elsevier, vol. 71(C).
    9. Assem Abu Hatab & Padmaja Ravula & Swamikannu Nedumaran & Carl-Johan Lagerkvist, 2022. "Perceptions of the impacts of urban sprawl among urban and peri-urban dwellers of Hyderabad, India: a Latent class clustering analysis," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 24(11), pages 12787-12812, November.
    10. Jordi Jofre-Monseny & Raquel Marín-López & Elisabet Viladecans-Marsal, 2012. "What underlies localization and urbanization economies? Evidence from the location of new firms," Working Papers XREAP2012-08, Xarxa de Referència en Economia Aplicada (XREAP), revised May 2012.
    11. Fu, Shihe & Shan, Liwei, 2011. "Agglomeration Economies and Local Comovement of Stock Returns," MPRA Paper 31887, University Library of Munich, Germany.
    12. Chloé Duvivier, 2013. "Does Urban Proximity Enhance Technical Efficiency? Evidence From Chinese Agriculture," Journal of Regional Science, Wiley Blackwell, vol. 53(5), pages 923-943, December.
    13. Jordi Jofre-Monseny & Raquel Marín-López & Elisabet Viladecans-Marsal, 2012. "What underlies localization and urbanization economies? Evidence from the location of new firms," Working Papers XREAP2012-08, Xarxa de Referència en Economia Aplicada (XREAP), revised May 2012.
    14. Michael Firth & Shihe Fu & Liwei Shan, 2017. "Do agglomeration economies affect the local comovement of stock returns? Evidence from China," Urban Studies, Urban Studies Journal Limited, vol. 54(5), pages 1142-1161, April.
    15. Anping Chen & Mark D. Partridge, 2013. "When are Cities Engines of Growth in China? Spread and Backwash Effects across the Urban Hierarchy," Regional Studies, Taylor & Francis Journals, vol. 47(8), pages 1313-1331, September.
    16. Tao, Jin & Ho, Chun-Yu & Luo, Shougui & Sheng, Yue, 2019. "Agglomeration economies in creative industries," Regional Science and Urban Economics, Elsevier, vol. 77(C), pages 141-154.
    17. Zhang, Cui, 2017. "Political connections and corporate environmental responsibility: Adopting or escaping?," Energy Economics, Elsevier, vol. 68(C), pages 539-547.
    18. Yuzhe Wu & Huiqiong Zhu & Sheng Zheng, 2022. "The Local Land Finance Transformation with the Synergy of Increment and Inventory: A Case Study in China," Land, MDPI, vol. 11(9), pages 1-18, September.
    19. Wang, Jian & Sun, Furong & Lv, Kangjuan & Wang, Lisha, 2022. "Industrial agglomeration and firm energy intensity: How important is spatial proximity?," Energy Economics, Elsevier, vol. 112(C).
    20. Cui Zhang, 2017. "Top manager characteristics, agglomeration economies and firm performance," Small Business Economics, Springer, vol. 48(3), pages 543-558, March.
    21. Jonathan Jones, 2017. "Agglomeration economies and the location of foreign direct investment: A meta-analysis," Journal of Regional Science, Wiley Blackwell, vol. 57(5), pages 731-757, November.
    22. Chen, Jie & Zhou, Qian, 2017. "City size and urban labor productivity in China: New evidence from spatial city-level panel data analysis," Economic Systems, Elsevier, vol. 41(2), pages 165-178.
    23. Chun‐Yu Ho & Yue Sheng, 2022. "Productivity advantage of large cities for creative industries," Papers in Regional Science, Wiley Blackwell, vol. 101(6), pages 1289-1306, December.

    More about this item

    JEL classification:

    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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