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Agglomeration Economies and Productivity Growth in Manufacturing Industry: Empirical Evidence from Indonesia
Author(s) -
Widodo Wahyu,
Salim Ruhul,
Bloch Harry
Publication year - 2014
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/1475-4932.12115
Subject(s) - economies of agglomeration , productivity , economics , competition (biology) , manufacturing , externality , diversity (politics) , economic geography , empirical evidence , index (typography) , multifactor productivity , industrial organization , total factor productivity , business , microeconomics , macroeconomics , ecology , marketing , sociology , world wide web , anthropology , computer science , biology , philosophy , epistemology
This study examines the effect of agglomeration economies on productivity growth in Indonesian manufacturing industries during the first decade of this century. Productivity growth is measured at the firm level using the Färe‐Primont Productivity Index. Each firm's productivity growth is then regressed against a set of firm and industry characteristics, including three measures of agglomeration representing the effects of specialisation, diversity and competition. The results show evidence of a positive specialisation effect and a negative diversity effect for aggregate manufacturing and sub‐sectors. Furthermore, there are mixed effects across industries, suggesting that Porter's competition externalities stimulate firm productivity growth under some conditions but not others.