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Industry characteristics and agglomeration of heterogeneous firms

Author

Listed:
  • Daguo Lv

    (Anhui University of Finance and Economics)

  • Lingyu Zhang

    (Fujian College of Water Conservancy and Electric Power)

  • Ren Lu

    (Guangdong University of Finance and Economics)

  • Jingtao Yao

    (Henan Senyuan Group Co., Ltd.)

Abstract

In this paper, we study the impact of two industry characteristics—relocation cost and market competition—on the location choice of firms with productivity heterogeneity between large market and small market. We find that only in industries with high relocation costs or fierce market competition, large markets are more attractive to high-productivity firms. We use Chinese firm data to test the predictions of the theoretical model, and the empirical results are consistent with the conclusions of the theoretical model.

Suggested Citation

  • Daguo Lv & Lingyu Zhang & Ren Lu & Jingtao Yao, 2022. "Industry characteristics and agglomeration of heterogeneous firms," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 49(1), pages 31-49, March.
    • Handle: RePEc:spr:epolin:v:49:y:2022:i:1:d:10.1007_s40812-021-00206-w
    DOI: 10.1007/s40812-021-00206-w
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    More about this item

    Keywords

    Heterogeneous firm; Productivity; Spatial selection; Relocation cost; Market competition;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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