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Firm productivity, wages, and agglomeration externalities

Listed author(s):
  • Fafchamps, Marcel
  • Hamine, Said El

Using detailed census data from Morocco, this paper investigates the existence of local externalities in manufacturing. In contrast to many other studies that focus on aggregate employment growth, we examine the effect of externalities on firm-level productivity and wages. Our empirical results show that agglomeration externalities occur through both productivity and wage effects. Returns to specialization are strong and large in magnitude. In accordance with the views of Marshall, Arrow and Romer, the net effect of competition on productivity and wages tends to be negative. Large firms facing no local competition have higher revenues and pay lower wages. We also find some limited evidence in favor of the diversity argument put forth by Jacobs.

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File URL: http://www.sciencedirect.com/science/article/pii/S1090944316302939
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Article provided by Elsevier in its journal Research in Economics.

Volume (Year): 71 (2017)
Issue (Month): 2 ()
Pages: 291-305

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Handle: RePEc:eee:reecon:v:71:y:2017:i:2:p:291-305
DOI: 10.1016/j.rie.2016.12.003
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622941

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  17. Marcel Fafchamps & Said El Hamine & Albert Zeufack, 2008. "Learning to Export: Evidence from Moroccan Manufacturing †," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 17(2), pages 305-355, March.
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