Agglomeration economies in the formal and informal sectors: a Bayesian spatial approach‡

Kiyoyasu Tanaka and Yoshihiro Hashiguchi

Journal of Economic Geography, 2020, vol. 20, issue 1, 37-66

Abstract: This article examines whether localized clusters of similar industries produce agglomeration economies in the formal and informal sectors. We develop a Bayesian method to estimate a spatial autoregressive model with an endogenous independent variable. We use establishment-level census data that cover both formal registered and informal unregistered establishments in Cambodia. We find that the density of local employment has a significantly positive effect on productivity in the informal sector, but little effect in the formal sector. For manufacturing, a doubling of employment density increases productivity in the informal sector by 9% through local linkages and by 19% through spatial multiplier linkages, leading to a 28% increase in total. A spatial network magnifies the local impact of agglomeration economies in the informal sector.

Keywords: Agglomeration economies; informal sector; Cambodia; bayes; spatial (search for similar items in EconPapers)
JEL-codes: C11 C21 C26 H26 O17 R12 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (9)

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