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Inter-regional spillover and intra-regional agglomeration effects among local labour markets in China

Xiaodong Gong (), Jiti Gao (), Xuan Liang () and Xin Meng ()

No 20/18, Monash Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics

Abstract: In this paper, we study intra-city agglomeration externality and inter-city spillover effects on productivity of 185 Chinese cities at and above the prefectural level for the years between 1995 and 2009. In particular, we investigate how a shock may be amplified or weakened by these externality effects and how productivity in a city varies with and affects that of other cities in the economy. We estimate the impacts of population size on productivity in 185 Chinese cities using spatial fixed-effect panel data models. Both the endogenous and exogenous spatial dependence are allowed for. The direct and indirect effects of the factors are calculated and compared for various city groups. We find that a significant positive effect of urban population on the real wage levels, which confirms the existence of agglomeration economy within regions. We also find significant differences in both the direct and indirect effect of factors such as FDI between more and less population dense areas. This seems to suggest that agglomeration economy may also exist among regions. Disparity between regions in economic growth and productivity could be explained by the statistically significant regional variations in the direct and indirect effects.

JEL-codes: C23 R12 R23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cna, nep-eff, nep-tra and nep-ure
Date: 2018
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