Geographic clusters, regional productivity and resource reallocation across firms: Evidence from China

Di Guo, Kun Jiang, Chenggang Xu and Xiyi Yang

Research Policy, 2023, vol. 52, issue 2

Abstract: We link industrial clusters, regional productivity and resource reallocation efficiency with geographical and sectoral disaggregated data. Based on a county-industry level panel from 1998 to 2007 in China, we find that industrial clusters significantly increase local industries' productivity by lifting the average firm productivity and reallocating resources from less to more productive firms. Moreover, we find major mechanisms through which resource reallocation is improved within clusters: (i) clusters are associated with a higher firm turnover with increased entry and exit rates simultaneously; and (ii) within clusters' environment, the dispersion of individual firm's markup is significantly reduced, indicating intensified local competition within clusters. Such results suggest that industrial clusters in China help improve regional productivity and resource allocation efficiency with intensified competition and accelerated firm dynamics. The identification issues are carefully addressed by two-stage estimations with instrumental variables and other robustness checks.

Keywords: Industrial cluster; Productivity growth; Resource reallocation; Competition (search for similar items in EconPapers)
JEL-codes: D2 L1 O1 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:respol:v:52:y:2023:i:2:s0048733322002128

DOI: 10.1016/j.respol.2022.104691

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