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Geographic concentration and firm productivity

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  • Mare, David
  • Timmins, Jason

Abstract

Firms operating in dense labour markets are more productive, although understanding the mechanisms behind this relationship is both challenging and contentious. This paper uses a newly assembled dataset on location and labour productivity of most New Zealand firms to examine the role of location patterns at the industry, local labour market, and industry*location levels. We derive estimates in the presence of firm, location, and period fixed effects, paying particular attention to controlling for unobserved local and industry factors. Our findings confirm that labour productivity is higher for firms in geographicallyconcentrated industries (“localisation”), for firms in more industrially-diversified labour markets (“urbanisation”), and for firms operating in larger labour markets. Controlling for heterogeneity of industries, locations, and firms, we find some support for a positive productivity effect of changes in both localisation and urbanisation, although not all estimated effects are statistically and economically significant.

Suggested Citation

  • Mare, David & Timmins, Jason, 2006. "Geographic concentration and firm productivity," Motu Working Papers 292860, Motu Economic and Public Policy Research.
    • Handle: RePEc:ags:motuwp:292860
    DOI: 10.22004/ag.econ.292860
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    2. Wan, Guanghua & Zhang, Yan, 2018. "The direct and indirect effects of infrastructure on firm productivity: Evidence from Chinese manufacturing," China Economic Review, Elsevier, vol. 49(C), pages 143-153.
    3. Stuart Birks, 2012. "Rethinking economics: Logical gaps – empirical to the real world," Working Papers 20121217, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    4. David Law & Bob Buckle & Dean Hyslop, 2006. "Toward a Model of Firm Productivity Dynamics," Treasury Working Paper Series 06/11, New Zealand Treasury.
    5. David Maré, 2008. "Labour Productivity in Auckland Firms," Occasional Papers 08/9, Ministry of Economic Development, New Zealand.
    6. Fabling, Richard & Mare, David C, 2015. "Production function estimation using New Zealand’s Longitudinal Business Database," Motu Working Papers 290585, Motu Economic and Public Policy Research.
    7. Lin, Hui-Lin & Li, Hsiao-Yun & Yang, Chih-Hai, 2011. "Agglomeration and productivity: Firm-level evidence from China's textile industry," China Economic Review, Elsevier, vol. 22(3), pages 313-329, September.
    8. Marko Danon, 2014. "Constructing a Novel Competitiveness Index for European Regions," GREDEG Working Papers 2014-42, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    9. Aaron Drew, 2007. "New Zealand's productivity performance and prospects," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 70, March.
    10. Richard Fabling & Arthur Grimes & Lynda Sanderson & Philip Stevens, 2008. "Some Rise by Sin, and Some by Virtue Fall: Firm Dynamics, Market Structure and Performance," Occasional Papers 08/1, Ministry of Economic Development, New Zealand.
    11. Maria Dav? & Isidora Barbaccia, 2015. "Measuring agglomeration by spatial effects: a proposal," RIVISTA DI ECONOMIA E STATISTICA DEL TERRITORIO, FrancoAngeli Editore, vol. 2015(1), pages 44-70.
    12. Mare, David C. & Coleman, Andrew, 2011. "Patterns of business location in Auckland," Motu Working Papers 291433, Motu Economic and Public Policy Research.
    13. Anne Otto & Dirk Fronahl, 2009. "Long-Term Growth Determinants Of Young Businesses In Germany – The Effects Of Regional Concentration And Specialisation," Romanian Journal of Regional Science, Romanian Regional Science Association, vol. 3(1), pages 1-35, JUNE.
    14. Otto, Anne & Fornahl, Dirk, 2008. "Long-term growth determinants of young businesses in Germany : effects of regional concentration and specialisation," IAB-Discussion Paper 200813, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].

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    Keywords

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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)

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