Agglomeration, Externalities And Labor Productivity

In recent years industrial agglomeration has attracted the concerns of city and regional economics because industrial agglomeration can bring about the sustained strong competitiveness and is a new path to review the competitiveness of the nation and region.Considering of the source of sustained competitiveness,Marshall (1920) stressed the importance of the external economic.Weber(1929) attributed to agglomeration economy.Krugman(1991b) thought that it is interaction results of increasing returns,transportation costs and the home market effect.Porter(2002) put emphasize on competition.Ultimately,the external economy is the most important effect to create and maintain competitive advantage of industrial clustering.At the same time,existed empirical research shows that China has entered the stage of the close relationship between the industrial agglomeration and regional economic development,which become stronger and stronger during the time going.All above prompts us to think about the following questions:(1) What is the internal mechanism of the China manufacturing agglomeration? That is to say,what is the factor that determines all kinds of different agglomeration levels of China′s manufacturing industries?(2) What is the effect of the industry spatial distribution model to regional industrial labor productivity? Whether the effect exist significant differences between manufacturing industries?These issues constitute this paper motives.Based on the research methods of spatial economy,this paper attempts to provide a new external explanation to the source of regional economic growth,starting from the close relationship between the industrial agglomeration and labor productivity.We give a comprehensive empirical description of the spatial distribution of Chinese manufacturing industry.Through the method of the interation of theory and quantization analysis,we inspect the formation mechanism of the industrial clustering and the economical effects,brought by this industrial clustering.Meanwhile we propose some policy suggestions.This paper takes apart into eight chapters.The outline and conclusion of each chapter is shown as following:Chapter 1:Introduction.This chapter gives a brief presentation to the motives and background,structural arrangements,research objective,methods,innovation points,as well as possible inadequacies of this study.Chapter 2:The summary of Literature.In this part,we comprehensively review the theoretical and empirical literature of the industrial agglomeration:Systemly review Marshall District theory,Weber's industrial location theory,the traditional trade theory,the new trade theory and Porter's competitive advantage theory,we explore in depth the micro-economic foundation of agglomeration economy.Meanwhile,we overview the current empirical literature about the existence and the formation mechanism of industrial agglomeration,as well as agglomeration effect.Chapter 3:The evolution and new development of the industry agglomeration Measurement.It is two different concepts about industry agglomeration and industry concentration.The agglomeration indices were established by Ellison and Glaeser (1997),who took full account of the impaction of enterprise scale and regional difference,and made up for the deficiencies of space Gini coefficient.They also enabled us to conduct the comparisons of cross-industry and cross-location.In addition,the latest distance-based measurement method proposed by Duranton and Overman(2005) meets many industry measurement requirements.But it is little practical in the case of the high standards of data.Chapter 4:Empirical description of regional agglomeration in China's manufacturing industries.This description is through two levels of two-digital and four-digital indices,especially including some indices developed by Ellison and Glaeser(1997).-We find that,Whether by 2-SIC level or by 4-SIC,all most manufacturing industries are somewhat different localized while the difference among industries is significant.In the same time,we also find that there are all kinds of extent of co-agglomeration of different four-digit industries within the same two-digit class in China's 28 two-digit manufacturing industries.Chapter 5:The study of the formation mechanism of manufacturing industries. Based on traditional comparative advantage theory,new trade theory,external theory,local protectionism and foreign trade framework,we examine the factors that determine the spatial pattern of China's manufacturing industries.Our empirical results show that these theories are all competent to explain China's current industrial agglomeration at some extent.Comparative advantage is the premise of industrial agglomeration formation,and China's comparative advantage is still in labor-intensive industries.Moreover,once industries cluster a specific location,the effect of scale economies will promote and strength this trend.At the same time,we find that the concentration of foreign capital in the coastal areas rise the foreign capital-intensive industrial agglomeration.This paper also provides strong evidence in support of local protectionism.Chapter 6:Localization economies,urbanization economies and labor productivity.In this part,we focus on agglomeration effects.Agglomeration economy is the external economies in the nature.In accordance with external theory,a large number of industrial cluster in a specific region,through the sharing of infrastructure, and professional labor market,and intermediate inputs,as well as the promotion of knowledge spillovers,and other channels,can produce a wide range of external effects.We embody such external effect for labor productivity improvement.Based on a data of the four-digital manufacturing industries in China in 2003,we empirically examined the impact of localization economies and urbanization economies on the labor productivity.We found that,in terms of entire manufacturing industries,both localization economies and urbanization economies promoted regional industry labor productivity.Meanwhile,we also analyzed whether the two forms of the externalities existed different effects among manufacturing industries.It turned out that localization economies played a significantly positive role in most of industries,while urbanization economies were only found in the high-tech industries.Chapter 7:Within-industry agglomeration,co-agglomeration and labor productivity.On the basis of chapterⅥconclusion,we decomposed the important forms of externality—localization economy into within-industry agglomeration and co-agglomeration,we empirically examined the impact of localization economy on the labor productivity.In statistical,we adopt lag,which can not only control endogenous problems caused by simultaneity,but also enable us to investigate the static and dynamic externalities.We found that,in terms of entire manufacturing industries,both within-agglomeration and co-agglomeration promoted regional industry labor productivity.This indicate that there are within-industry agglomeration in the same industries,and co-agglomeration in related industries arising from interaction and knowledge spillovers between upstream,downstream industries. Furthermore,we also analyzed whether the two forms of the localization economy existed different effects among manufacturing industries.It turned out that within-agglomeration played a significantly positive role in traditional labor-intensive industries,high-tech and capital-intensive industries mature industry, co-agglomeration as well in the capital-intensive industries mature industry.Chapter 8:Conclusion. Overall,comparing the existing literature,this paper has the following several innovations on the study of the industrial agglomeration,externality and labor productivity:Firstly,this paper gives a comprehensive and systematic description of the spatial distribution based on available statistical data of four-digit manufacturing industries.Secondly,it is the first time in domestic to use the four-digit manufacturing industries to empirically examine the industrial agglomeration effect,which is different from most of study that use two-digit or three-digital manufacturing industries data;thirdly,Besides examining within-industry agglomeration,we also investigate co-agglomeration,which enrich the empirical evidence of externality.As far as we know,studying the impact of related industries co-agglomeration on labor productivity is very less at home and abroad.