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Agglomeration and resilience: Impact of Covid-19 on clustered and non-clustered SMEs in Bangladesh

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  • Iqbal, Kazi
  • Mahmood, Tanveer
  • Pabon, Md Nahid Ferdous

Abstract

Agglomeration forces are argued to make enterprises in clusters more resilient to shocks than enterprises outside the clusters. We examine this hypothesis in the context of the impact of Covid-19 on small and medium enterprises (SMEs) in Bangladesh. Using pre and post-Covid-19 survey datasets, we observe a V-shape recovery of the SMEs, with a steeper recovery for the clustered SMEs. Controlling for month and firm (workers) fixed effects, we found no significant differences between SMEs in clusters and SMEs outside during and immediately after the lockdown. However, gaps in output, sales, employment, and inventories between clusters and non-clusters widened over time as the clustered SMEs’ recovery was stronger. We show that the agglomeration force, particularly sharing and learning can be an important source of resilience to cope with shocks. Our findings have significant implications for cluster development policies in developing countries.

Suggested Citation

  • Iqbal, Kazi & Mahmood, Tanveer & Pabon, Md Nahid Ferdous, 2025. "Agglomeration and resilience: Impact of Covid-19 on clustered and non-clustered SMEs in Bangladesh," Journal of Asian Economics, Elsevier, vol. 100(C).
    • Handle: RePEc:eee:asieco:v:100:y:2025:i:c:s1049007825001253
    DOI: 10.1016/j.asieco.2025.102001
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    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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