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TESTING URBANIZATION ECONOMIES IN MANUFACTURING INDUSTRIES: URBAN DIVERSITY OR URBAN SIZE?
Author(s) -
Fu Shihe,
Hong Junjie
Publication year - 2011
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.1467-9787.2010.00702.x
Subject(s) - economies of agglomeration , urbanization , economic geography , diversity (politics) , economies of scale , productivity , externality , population size , human capital , census , manufacturing , china , market size , population , capital (architecture) , economics , urban economics , economy , business , geography , economic growth , international economics , microeconomics , demography , archaeology , marketing , sociology , anthropology
Whether urbanization economies stem from urban diversity or urban scale is not clear in the literature. This paper uses the 2004 China manufacturing census data and tests simultaneously the effects of urban size and industrial diversity on firm productivity, controlling for localization economies and human capital externalities. We find that productivity increases with city size—but at a diminishing rate, and the city size effect becomes negative for cities with population over two million. Firms also benefit from industrial diversity, and the strength of such benefit increases with city size but decreases with firm size. The characteristics of agglomeration economies in a transition economy are also discussed.