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Agglomeration and firm‐level productivity: A B ayesian spatial approach
Author(s) -
Hashiguchi Yoshihiro,
Tanaka Kiyoyasu
Publication year - 2015
Publication title -
papers in regional science
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.937
H-Index - 64
eISSN - 1435-5957
pISSN - 1056-8190
DOI - 10.1111/pirs.12147
Subject(s) - economies of agglomeration , productivity , externality , economic geography , instrumental variable , endogeneity , urbanization , economics , spatial econometrics , population , industrial organization , econometrics , microeconomics , economic growth , demography , sociology
This paper estimates the impact of industrial agglomeration on firm‐level productivity in Chinese manufacturing sectors. To account for spatial autocorrelation across regions, we formulate a hierarchical spatial model and use a B ayesian instrumental‐variable approach. We find that agglomeration of the same industry (i.e., localization) has a productivity‐boosting effect, but agglomeration of urban population (i.e., urbanization) has no such effect. In addition, the localization effect increases with the educational levels of employees and the share of intermediate inputs in gross output. These results may suggest that agglomeration externalities occur through knowledge spillovers and input sharing among firms producing similar manufactures.