Agglomeration economies in the formal and informal sectors: a Bayesian spatial approach
Kiyoyasu Tanaka () and
No 666, IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO)
This paper 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 17% through spatial multiplier linkages, leading to a 26% increase in total. A spatial network magnifies the local impact of agglomeration economies in the informal sector.
Keywords: Cambodia; Industry; Informal sector; Productivity; Agglomeration economies; Bayes (search for similar items in EconPapers)
JEL-codes: C11 C21 C26 H26 O17 R12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eff, nep-geo, nep-iue, nep-sea and nep-ure
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Published in IDE Discussion Paper = IDE Discussion Paper , No. 666. 2017-05
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