Agglomeration, Externalities And Economic Growth

Economic growth and agglomeration are the two fundamental properties of economic activities; however, economists in both fields have been doing researches along their respective path. Compared with diverse economic growth theories, the theories of regional economic agglomeration seem scarce and relatively immature. As Krugman (1991) create new geographical economics, it is gradually becoming the core research areas of economics. Therefore, the economic activity of the temporal and spatial properties of mutual integration of the economics profession is necessary and urgent needs.Dynamic externality theory is an important explanation of the relationship between agglomeration and economic growth. It emphasizes the technology or knowledge spillover is a dynamic process and cumulative priori information on the economic activities has an important role in regional development. However, as for the source of this externality, different scholars have different views. The intra-industry exchange of knowledge between enterprises is called MAR externalities (or specialization externality), externality generated by interactive learning in the same region between different industries is called Jacobs externalities (or diversification externality), and competition among enterprises within the same industry is called Porter externalities (or competition externality). In recent years, many scholars have carried out different empirical research on the basis of data from the United States, Europe and Asian countries, to study the existence and impact of these three externalities, but the result is significantly different.The paper is to measure the three externalities and their influence on economic growth with reference to domestic and foreign researches on the relationship between industrial agglomeration and regional economic growth. The author refers to the basic method of Glaeser (1992) & Henderson (1994) and the model structure of De Lucio (1998). This article uses the panel data of 129 three-digit manufacturing industries in Yangtze River Delta region between 2000-2009 to examine the source of industrial agglomeration in Yangtze River, and the impact of specialization externality, diversification externality as well as competition externality on regional economic growth. The results show that in the Yangtze River Delta MAR externalities and Jacobs externalities exist, and the industrial externality is generated form spillover of knowledge and technology within the industry as well as between different industries. But Porter externalities remains of uncertainty since increased competition within the industry benefit economic growth in the short term, but in the long run it have a negative impact.