A Study On Effects Of Industry Agglomeration On Total Factor Productivity Of China's Manufacture Industry

China's economy has developed with approximately 10% of the average annual growth rate since reform and opening up over the past three decades. The growth mode of factor-inputs driven has played an important role in China's economic growth and has confronted with some serious problems. The economic growth mode relying on investment driven capital investment has brought a lot of contradictions, while relying on the consuming of resources would encounter the bottleneck of the labor force "dividend". In this context, improving the level of total factor productivity(TFP) is an important way to change the growth mode of China from factor inputs-driven to innovation-driven.The new economic geography theory suggests that industry agglomeration is an important factor affecting TFP growth. However, this theory only focuses on the space selection behavior of homogeneity of firms to analyze the microscopic mechanism of agglomeration economies, ignored the firm heterogeneity factors. The new-new economic geography theory which based on the assumption of firm heterogeneity makes up for the shortcoming and suggests that space selection of firms is not a random behavior, which will affect the spatial distribution of agglomeration economies and the TFP growth. Therefore, This paper explores the influence of industry agglomeration on TFP growth from the theoretical and empirical levels with analytical framework based on new economic geography theory and the new-new economic geography theory, respectively.Firstly, this paper summarizes research literature of domestic and foreign and tease out the mechanism of agglomeration economies to TFP growth within the framework of new economic geography theory. This paper also uses the dynamic GMM method to empirical analysis with industries and regional panel data of Chinese manufacturing, and compares the empirical results with the different industry types and different regions. We found that agglomeration in industries have a significant positive effect on TFP growth of Chinese manufacturing, which is consistent with the theoretical analysis.The moderately and lowly concentrated industries have a significant positive effect, but the effect of highly concentrated industries is not significant. Agglomeration in regions also have a positive effect on TFP growth. However, the positive effects is relatively small, the effect of central and western regions is significantly greater than the eastern region.Secondly, this paper discusses mechanism of firm space selection of different productivity levels to industry agglomeration by introducing firm heterogeneity variables, and derives the mechanism of agglomeration of heterogeneity firm to TFP growth within the framework of the new- new economic geography theory. This paper also uses Chinese firm panel data to empirical test the theoretical hypotheses. The results show that the regional capital endowment, trade openness and productivity of firm migration will affect the spatial agglomeration and TFP growth, and firms with high levels of productivity more tend to gather in the large market area than firms with low level of productivity which improving the average level of regional productivity.The empirical test results also show that there is a significant positive correlation effect between the regional scale and enterprise productivity, and firms in the largest market have higher level of productivity.Finally, based on theoretical and empirical analysis, this paper gives some suggestions to the corresponding countermeasures on the adjustment of industrial layout and improvement of total factor productivity and conformity of regional economic development.