The Agglomeration Of Producer Services And China's Manufacturing Total Factor Productivity

Starting from the Chinese economic reform,China manufacturing industry has taken advantage of low-cost primary factors to quickly join the “Global Value Chain”,realizing remarkable progress.However,the factor-based extensive development has led to a serial of problems,including resources shortage,environmental pollution,surplus production,etc.Therefore,the manufacturing industry of China needs to transfer from the factor-based development to total factor productivity-motivated development.The lift of total factor productivity(TFP)is the core of the upgrade of manufacturing.Meantime,producer services,as the direct intermediate input of manufacturing,starts to agglomerate in cities,and the extent of agglomeration exceeds that of the manufacturing.Because of the agglomeration,producer services become more and more important for the development of manufacturing.Has the agglomeration of producer services promoted the growth of the TFP of manufacturing?Answering this question is of important theoretical and practical meanings under the current economic background.This thesis studies the effects of the agglomeration of producer services on the TFP of China manufacturing industry.The research includes the following four core contents: First,it builds a theoretical framework of how the agglomeration of producer services impacts the TFP of manufacturing.It builds a mathematical model of the agglomeration of producer services impacting TFP of manufacturing based on Grossman and Rossi-Hansberg(2008).With the model,it explores the mechanism of how agglomeration impacts on TFP based on the origin of TFP growth,technology innovation and resource allocation.Second,using the 2003-2013 micro-database of the manufacturing industry of China,it empirically tests the real impact of the agglomeration of producer services on TFP of manufacturing,and adopts Chodorow-Reich and Wieland(2016)to deal with endogeneity.To identify the differences of the cluster-TFP impact,it conducts various tests by grouping firms based on regions and sectors,etc.Third,it empirically studies the mechanism of the agglomeration of producer services impacting on TFP of manufacturing firms from aperspective of firm-level technology innovation.It explores the effect of the agglomeration of producer services on the innovation of manufacturing firms based on the China firm-level database,and adopts the two-step Heckman method to solve the selection bias and the IV method to solve endogeneity.It then adopts mediating effect-recursive model to test the impact of the agglomeration of producer services on TFP of manufacturing via the channel of technology innovation.Fourth,it analyzes the effect of the agglomeration of producer services on TFP of manufacturing from a perspective of resource allocation of firms.It builds an index of resource misallocation of firms based on Hsieh and Klenow(2009)to reflect the inside resource allocation of firms.Then it uses econometric method to study the effect of the agglomeration of producer services on resource allocation of manufacturing firms.And finally,it studies the effect of the agglomeration of producer services on TFP of manufacturing via the channel of resource allocation by using the recursive model.This thesis has four main conclusions:First,theoretical research shows that the increase of the agglomeration of producer services can promote the growth of the TFP of manufacturing firms.Specifically,the agglomeration of producer services can stimulate the investment of research and development,the spillover of knowledge,the lift of human resources and the deepening of social division of labor.By doing so,the agglomeration of producer services can enhance the innovation capacity of manufacturing firms and help firms to lift TFP.In addition,the agglomeration of producer services would generate scales of economy and increase competition,as well as optimize the integration of resources.All of these can improve the resource allocation of manufacturing firms and promote the growth of TFP of firms.Second,the paper empirically tests the real impact of the agglomeration of producer services on TFP of manufacturing,which shows that the agglomeration of producer services has a significant positive effect on the growth of manufacturing TFP.The effect is robust after dealing with endogeneity.Results of group tests show that the effect of the agglomeration on TFP is very significant for the eastern region,less significant for the middle region,and not significant for the western region.The effectis more significant for technology-intensive firms than for capital-and labor-intensive firms.Furthermore,the agglomeration of producer services can promote the growth of TFP of private firms more than that of state-owned firms and foreign invested firms.The results are robust after altering the measure of key variables,changing time period of samples and controlling region and time effects.Third,the tests of the mechanism of technological innovation show that,the agglomeration of producer services evidently promotes technology innovation of manufacturing firms.Moreover,the results of Heckman's two-step selection model show that the agglomeration of producer services can promote the innovation decision of firms,and at the meantime,increase the innovation output of firms.Heterogeneity analysis shows that,the effect of the agglomeration of producer services on innovation of firms is more significant for coastal areas than for inland regions.Compared with small-scale firms,the agglomeration of productive services has a stronger technological innovation effect on large-scale firms.The increased agglomeration of sophisticated producer services can increase the innovation output of firm even more.The analysis of the mediating effect shows that,the agglomeration of producer services can promote the growth of TFP of manufacturing firms through the channel of technology innovation.Fourth,the tests of the mechanism of resource allocation show that,the agglomeration of producer services significantly reduces the misallocation of resources and the distortion of factor inputs,optimizing resource allocation of firms,and the agglomeration can especially modify the distortion of capital input.Heterogeneity analysis shows that,the agglomeration of producer services in large cities has more significant effect on resource misallocation of firms.The local firms would experience more evident effect of the agglomeration on resource misallocation than foreign invested firms.Information transmission,computer services and software would have the most significant effects of the cluster,while the rent and business services would experience insignificant effect of the agglomeration on resource misallocation.Moreover,the agglomeration of producer services can positively impact on the TFP of manufacturing firms by modifying the resource misallocation offirms.