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Geographic concentration and firm productivity

  • David C. Maré

    ()

    (Motu Economic and Public Policy Research)

  • Jason Timmins

    ()

    (New Zealand Department of Labour)

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 geographically-concentrated 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.

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File URL: http://motu-www.motu.org.nz/wpapers/06_08.pdf
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Paper provided by Motu Economic and Public Policy Research in its series Working Papers with number 06_08.

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Length: 50 pages
Date of creation: Oct 2006
Date of revision:
Handle: RePEc:mtu:wpaper:06_08
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  13. Rosenthal, Stuart S. & Strange, William C., 2004. "Evidence on the nature and sources of agglomeration economies," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 49, pages 2119-2171 Elsevier.
  14. Nick Carroll & Dean Hyslop & David Mare & Jason Timmins & Julian Wood, 2002. "An analysis of New Zealand's business demography database," New Zealand Economic Papers, Taylor & Francis Journals, vol. 36(1), pages 59-61.
  15. Papps, Kerry L. & Newell, James O., 2002. "Identifying Functional Labour Market Areas in New Zealand: A Reconnaissance Study Using Travel-to-Work Data," IZA Discussion Papers 443, Institute for the Study of Labor (IZA).
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