Firm sorting, clustering, and vertical disintegration: Evidence from China

Yingyue Quan

Regional Science and Urban Economics, 2025, vol. 110, issue C

Abstract: Using universal firm-level data on the garment sector in Pearl River Delta, China, we show that clustered firms are more likely to be vertically disintegrated. Additionally, an increase in clustering and vertical disintegration is observed following China’s accession to the World Trade Organization. However, most models of changes in agglomeration forces fail to explain these findings. Contrary to the commonly held view that high-productivity firms sort into clusters, we show that agglomeration can disproportionately benefit less productive firms when the agglomeration force is input sharing. Empirical evidence supports this view.

Keywords: Clustering; Vertical disintegration; Firm sorting; Garment manufacturing (search for similar items in EconPapers)
JEL-codes: D22 O18 R12 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:regeco:v:110:y:2025:i:c:s0166046224000978

DOI: 10.1016/j.regsciurbeco.2024.104066

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