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Firm productivity, wages, and agglomeration externalities

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  • Marcel Fafchamps
  • Said El Hamine

Abstract

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 occur through both productivity and wage effects, returns to specialisation are strong and large in magnitude. In accordance with the views of Marshall, Arrow and Romer, the net effect of competition have higher revenues and pay lower wages. Competition tends to lower wages, however, probably because of thick labor market externalities. We also find some limited evidence in favour of the diversity argument put forth by Jacobs.

Suggested Citation

  • Marcel Fafchamps & Said El Hamine, 2004. "Firm productivity, wages, and agglomeration externalities," CSAE Working Paper Series 2004-32, Centre for the Study of African Economies, University of Oxford.
  • Handle: RePEc:csa:wpaper:2004-32
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    Cited by:

    1. Marco Sanfilippo & Adnan Seric, 2016. "Spillovers from agglomerations and inward FDI: a multilevel analysis on sub-Saharan African firms," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 152(1), pages 147-176, February.
    2. repec:eee:reecon:v:71:y:2017:i:2:p:282-290 is not listed on IDEAS
    3. Bigsten, Arne & Gebreeyesus, Mulu & Siba, Eyerusalem & Soderbom, Måns, 2012. "Enterprise Agglomeration, Output Prices, and Physical Productivity: Firm-Level Evidence from Ethiopia," WIDER Working Paper Series 085, World Institute for Development Economic Research (UNU-WIDER).
    4. repec:eee:reecon:v:71:y:2017:i:3:p:373-383 is not listed on IDEAS

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