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Agglomeration Premium and Trading Activity of Firms

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  • Gábor Békés
  • Péter Harasztosi

Abstract

Firms may benefit from proximity to each other due to the existence of several externalities. The productivity premia of firms located in agglomerated regions can be attributed to savings and gains from external economies. However, the capacity to absorb information may depend on activities of the firm, such as involvement in international trade. Importers, exporters and two-way traders are likely to employ a different bundle of resources and be organised differently so that they would appreciate inputs and information from other firms in a different fashion and intensity. Getting a better understanding of such external economies by looking at various types of firms is the focus of present paper. Using Hungarian manufacturing data from 1992-2003, we confirm that firms perform better in agglomerated areas and show that traders gain more in terms of productivity than non-traders when agglomeration rises. Firms that are stable participants of international trade gain 16 % in terms of total factor productivity growth as agglomeration doubles while non-traders may not benefit from agglomeration at all. Results also suggest that traders' productivity premium is most apparent in urbanised economies.

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  • Gábor Békés & Péter Harasztosi, 2010. "Agglomeration Premium and Trading Activity of Firms," CeFiG Working Papers 11, Center for Firms in the Global Economy, revised 28 Jan 2010.
  • Handle: RePEc:cfg:cfigwp:11
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    3. Sun, Churen & Tian, Guoqiang & Zhang, Tao, 2011. "When Pareto meets Melitz: the inapplicability of the Melitz-Pareto model for Chinese firms," MPRA Paper 35597, University Library of Munich, Germany.
    4. Ksenia Gonchar & Tatyana Ratnikova, 2012. "Explaining the Productivity Advantages of Manufacturing Firms in Russian Urban Agglomerations," HSE Working papers WP BRP 22/EC/2012, National Research University Higher School of Economics.
    5. Gábor Békés & Péter Harasztosi, 2020. "Machine imports, technology adoption, and local spillovers," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 156(2), pages 343-375, May.
    6. Gábor Békés & Péter Harasztosi, 2018. "Grid and shake: spatial aggregation and the robustness of regionally estimated elasticities," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 60(1), pages 143-170, January.
    7. Evgeniya Kolomak, 2012. "Urbanization and Economic Development in Russia," ERSA conference papers ersa12p82, European Regional Science Association.
    8. Maximilian Stallkamp & Brian C Pinkham & Andreas P J Schotter & Olha Buchel, 2018. "Core or periphery? The effects of country-of-origin agglomerations on the within-country expansion of MNEs," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 49(8), pages 942-966, October.
    9. Oleksandr Shepotylo, 2012. "Cities in Transition," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 54(3), pages 661-688, September.
    10. Zoltán Elekes & Balázs Lengyel, 2016. "Related trade linkages, foreign firms, and employment growth in less developed regions," Papers in Evolutionary Economic Geography (PEEG) 1620, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Aug 2016.
    11. Churen Sun & Zhihao Yu & Tao Zhang, 2012. "Agglomeration, Productivity, and Firms¡® Exports: Evidence from Chinese Firm-level Data," ERSA conference papers ersa12p882, European Regional Science Association.
    12. Gabor Bekes & Peter Harasztosi, 2015. "Grid and shake - Spatial aggregation and robustness of regionally estimated elasticities," CERS-IE WORKING PAPERS 1526, Institute of Economics, Centre for Economic and Regional Studies.
    13. Eugenia Anatolyevna Kolomak, 2018. "Why Cities Emerge and Grow? Explanations of Theoretical and Empirical Studies," Spatial Economics=Prostranstvennaya Ekonomika, Economic Research Institute, Far Eastern Branch, Russian Academy of Sciences (Khabarovsk, Russia), issue 2, pages 134-153.
    14. Zoltán Elekes & Ron Boschma & Balázs Lengyel, 2018. "Foreign-owned firms as agents of structural change in regions: the case of Hungary 2000-2009," Papers in Evolutionary Economic Geography (PEEG) 1812, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Mar 2018.
    15. Sun, Churen & Yu, Zhihao & Zhang, Tao, 2012. "Agglomeration and Trade with Heterogeneous Firms," MPRA Paper 49001, University Library of Munich, Germany, revised 17 Aug 2013.

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    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • 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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