Industrial structure and urban agglomeration: evidence from Chinese cities

Zhi Li (), Chengri Ding () and Yi Niu ()
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Zhi Li: National Development and Reform Commission
Chengri Ding: University of Maryland
Yi Niu: Capital University of Economics and Business

The Annals of Regional Science, 2019, vol. 63, issue 1, No 8, 218 pages

Abstract: Abstract This paper investigates whether and how regional industrial structure/concentration influences firm productivity. Based on the firm-level data from China, the paper estimates firm productivity with regional structure conditioning on agglomeration effects and concludes that regional industrial structure plays little role in firm’s output, but affects localization agglomeration, which in turn affects firm productivity. In other words, localization agglomeration is stronger in cities in which sectors are less dominated by a few large firms in their own sector. Our conclusions are robust to the classification of industries, intertemporal, and spatial dimensions of agglomeration externalities, alternative measures of regional industrial structure and agglomeration, and different spatial scales in which standard errors are clustered. An important policy implication of our findings is that China’s industrial policies favoring large firms may be harmful to local economic development in the long term.

JEL-codes: F1 L1 R1 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (6)

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DOI: 10.1007/s00168-019-00932-z

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