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Density and Allocative Efficiency in Turkish Manufacturing

Author

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  • Orhun Sevinc

Abstract

Using administrative data covering the economic geography of Turkish manufacturing firms I show that density increases a location’s productivity through both typical firm productivity and stronger association of firm size and productivity—a measure of within-sector allocative efficiency. IV estimates suggest a density elasticity of allocative efficiency that accounts for about one third of the overall impact of density on productivity. A model with decreasing returns to scale and convex cost of avoidance from the burden of regulations can explain the estimated density-allocative efficiency relationship on the grounds that denser locations provide lower degree of internal diseconomies.

Suggested Citation

  • Orhun Sevinc, 2021. "Density and Allocative Efficiency in Turkish Manufacturing," Working Papers 2125, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    • Handle: RePEc:tcb:wpaper:2125
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    File URL: https://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN/Main+Menu/Publications/Research/Working+Paperss/2021/21-25
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    More about this item

    Keywords

    Density; Allocative efficiency; Cities in developing economies;
    All these keywords.

    JEL classification:

    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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