| Based on firm-level data from1998-2007of Chinese communications equipment, computers and other electronic equipment manufacturing industry, for the first time in China, on a County level we investigate the impact of Localization and Urbanization on elements of productivity growth. To improve the defects in choice of geographical level, industry level and productivity indicators in old literature, we construct agglomeration indicators on county and three-digit industry level. And we measure TFP and its decomposition rather than biased labor productivity, we study the impact of localization and urbanization on Technology Change and efficiency Promotion. Different from old literature, we argue that the study of agglomeration and externalities should focus on not only the existence and impacts of it, but also the channels how these impacts work.We find that,1) Technology Change and Efficiency Promotion are the most core elements of productivity growth in1998-2007;2) results support the evidence of both Localization and Urbanization on county level, but Localization is more significant;3) most importantly, we find that localization spurs TFP growth by the channel of promoting technology efficiency, while urbanization spurs TFP growth by the channel of promoting frontier technology progress;4) our results support that scale of industry is the source of localization but not number of firms, which is different from Henderson(2003).As to policy, we argue that county maybe can’t use efficiency promotion and technology progress both. Action can be taken after full consideration between the ability to change technology frontier and efficiency promotion ability relative to the frontier. In addition, for source of localization is firm size rather than number, then choice between introducing new enterprise and focusing on bigger and stronger local existing plants should also be considered carefully. |
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