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AGGLOMERATION EXTERNALITIES, PRODUCTIVITY, AND TECHNICAL INEFFICIENCY *
Author(s) -
Tveteras Ragnar,
Battese George E.
Publication year - 2006
Publication title -
journal of regional science
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.171
H-Index - 79
eISSN - 1467-9787
pISSN - 0022-4146
DOI - 10.1111/j.1467-9787.2006.00470.x
Subject(s) - inefficiency , economies of agglomeration , externality , productivity , production–possibility frontier , economics , production (economics) , frontier , microeconomics , industrial organization , productive efficiency , econometrics , macroeconomics , history , archaeology
Agglomeration externalities can have positive effects on both the production possibility frontier and technical inefficiency of firms. Increased levels of localized knowledge spillovers and substitution of internal inputs with external inputs may lead to fewer errors in decision‐making and execution of production tasks, thus causing firms to become technically more efficient relative to the production frontier. When we estimate a stochastic frontier production model on a large panel of salmon aquaculture farms, we find econometric support for positive agglomeration externalities on both the production frontier and technical inefficiency.