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Agglomeration and firm-level productivity : a Bayesian spatial approach

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  • Hashiguchi, Yoshihiro
  • Tanaka, Kiyoyasu

Abstract

This paper estimates the impact of industrial agglomeration on firm-level productivity in Chinese manufacturing sectors. To account for spatial autocorrelation across regions, we formulate a hierarchical spatial model at the firm level and develop a Bayesian estimation algorithm. A Bayesian instrumental-variables approach is used to address endogeneity bias of agglomeration. Robust to these potential biases, we find that agglomeration of the same industry (i.e. localization) has a productivity-boosting effect, but agglomeration of urban population (i.e. urbanization) has no such effects. Additionally, the localization effects increase with educational levels of employees and the share of intermediate inputs in gross output. These results may suggest that agglomeration externalities occur through knowledge spillovers and input sharing among firms producing similar manufactures.

Suggested Citation

  • Hashiguchi, Yoshihiro & Tanaka, Kiyoyasu, 2013. "Agglomeration and firm-level productivity : a Bayesian spatial approach," IDE Discussion Papers 403, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  • Handle: RePEc:jet:dpaper:dpaper403
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Yang, Chih-Hai & Lin, Hui-Lin & Li, Hsiao-Yun, 2013. "Influences of production and R&D agglomeration on productivity: Evidence from Chinese electronics firms," China Economic Review, Elsevier, vol. 27(C), pages 162-178.
    2. Carlos Carreira & Luís Lopes, 2016. "Collecting new pieces to the regional knowledge spillovers puzzle: high-tech versus low-tech industries," GEMF Working Papers 2016-06, GEMF, Faculty of Economics, University of Coimbra.
    3. repec:gam:jsusta:v:9:y:2017:i:10:p:1766-:d:113696 is not listed on IDEAS
    4. Tanaka, Kiyoyasu & Hashiguchi, Yoshihiro, 2017. "Agglomeration economies in the formal and informal sectors : a Bayesian spatial approach," IDE Discussion Papers 666, Institute of Developing Economies, Japan External Trade Organization(JETRO).

    More about this item

    Keywords

    China; Industrial policy; Manufacturing industries; Productivity; Local economy; Agglomeration economies; Spatial autocorrelation; Bayes; Chinese firm-level data; GIS;

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
    • R15 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods

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