Firm agglomeration and aggregate fluctuations

Yoshihiro Hashiguchi and Takayuki Higashikata

No 786, IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO)

Abstract: This study uses Indonesian plant-level manufacturing data from 2000 to 2014 to examine the role of individual firms located in agglomeration areas in generating aggregate fluctuations. While previous studies have used a method to decompose aggregate fluctuations into macroeconomic (sectoral) and firm-specific components, this paper illustrates an approach to further decompose the firm-specific component into higher and lower agglomeration groups. Our results suggest that plant-specific fluctuations in higher agglomeration areas have a greater impact on aggregate fluctuations than those in lower agglomeration areas, and the interaction or co-movements of plants in higher agglomerations areas have a significant role to drive aggregate fluctuations.

Keywords: Aggregate fluctuation; firm agglomeration; plant-level data; Indonesia; Business enterprises (search for similar items in EconPapers)
JEL-codes: E23 E32 R11 R12 (search for similar items in EconPapers)
Date: 2020-05
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Published in IDE Discussion Paper = IDE Discussion Paper, No. 786. 2020-05

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