Density and Allocative Efficiency in Turkish Manufacturing

Orhun Sevinc

Working Papers from Research and Monetary Policy Department, Central Bank of the Republic of Turkey

Abstract: Using administrative data covering the economic geography of Turkish manufacturing firms I show that density increases a location’s productivity through both typical firm productivity and stronger association of firm size and productivity—a measure of within-sector allocative efficiency. IV estimates suggest a density elasticity of allocative efficiency that accounts for about one third of the overall impact of density on productivity. A model with decreasing returns to scale and convex cost of avoidance from the burden of regulations can explain the estimated density-allocative efficiency relationship on the grounds that denser locations provide lower degree of internal diseconomies.

Keywords: Density; Allocative efficiency; Cities in developing economies (search for similar items in EconPapers)
JEL-codes: R10 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-ara, nep-eff, nep-geo, nep-isf and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:tcb:wpaper:2125

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