DETERMINANTS OF AGGLOMERATION IN KOREAN MANUFACTURING INDUSTRIES

Eui-Chul Chung (), Bun Song Lee and Chanho Cho ()
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Eui-Chul Chung: Department of Real Estate Studies, Konkuk University, Seoul 05029, Korea
Bun Song Lee: Department of Accounting, Economics and Finance, University of Arkansas-Fort Smith, Fort Smith, AR 72913, USA
Chanho Cho: Black Hills State University, College of Business, Spearfish, SD 57700, USA

The Singapore Economic Review (SER), 2021, vol. 66, issue 05, 1293-1319

Abstract: Despite accumulated findings on the effects of agglomeration on productivity of manufacturing industries in Korea, little is known about the determinants of agglomeration. Employing an approach similar to Rosenthal and Strange (2001) [Rosenthal, S and W Strange (2001). The determinants of agglomeration. Journal of Urban Economics, 50(2), 191–229.], but using a different agglomeration index, this study examines whether the three microfoundations of agglomeration economies are important to the geographical concentration of Korean manufacturing industries. While estimation results generally confirm that labor market pooling, input sharing and knowledge spillovers contribute to agglomeration, we found some differences with the previous literature. First, non-manufactured inputs are more influential on agglomeration than manufactured inputs. Secondly, aggregate innovation activities, rather than their share of shipments, are a better measure of knowledge spillovers to explain agglomeration. Thirdly, agglomeration of newly established firms is also influenced by the Marshallian externalities with labor market pooling having a stronger and consistent effect. These results are robust to instrumental variables estimation to control for endogeneity related to knowledge spillovers and labor market pooling.

Keywords: Agglomeration; employment location quotient; input sharing; knowledge spillovers; labor market pooling (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1142/S0217590818500169

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