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The issue of whether firm productivity is affected by agglomeration externalities is a longstanding area of research. However, the appropriate geographical level to better detect the effects of agglomeration economies is still unclear, and at which level these externalities work. Using detailed firm-level longitudinal data of manufacturing firms over the period 2008-2016 in the United Kingdom, we investigate how the micro-geography of external agglomeration economies associates with firm productivity, comparing different geographical levels: citywide and narrowly defined neighborhoods around a firm. Results from a multilevel (mixed-effects) model show that urbanization externalities play a role at a higher level of geographical aggregation, such as the city, whereas localization externalities operate at a finer level, within the city and in a closer neighborhood to the firm. Failing to control for more granular level of geography results in confounding the two types of externalities. We also provide novel evidence that these externalities vary across firms (such as age, size and productivity) and location (such as population density) characteristics.

Recent empirical work suggests that there are large agglomeration gains from working and living in developing country cities. These estimates find that doubling city size is associated with an increase in productivity by 19 percent in China, 12 percent in India, and 17 percent in Africa. These agglomeration benefits are considerably higher relative to developed country cities, which are in the range of 4 to 6 percent. However, many developing country cities are costly, crowded, and disconnected, and face slow structural transformation. To understand the true productivity advantages of cities in developing countries, this paper systematically evaluates more than 1,200 elasticity estimates from 70 studies in 33 countries. Using a frontier methodology for conducting meta-analysis, it finds that the elasticity estimates in developing countries are at most 1 percentage point higher than in advanced economies, but not significantly so. The paper provides novel estimates of the elasticity of pollution, homicide, and congestion, using a large sample of developing and developed country cities. No evidence is found for productivity gains in light of the high and increasing costs of working in developing country cities.

International audience; The aim of this paper is to infer the spatial extent of agglomeration economies for the creative service industries (CSI) in Barcelona and its relationship with firm performance controlling for urban characteristics and demand factors. Using micro-geographic data from the mercantile register for firms between 2006 and 2015, I estimated the effect of intra-industry and inter-industry agglomeration in rings around location on productivity in Barcelona. The main results are (1) for CSI, at a micro-spatial level, localisation economies are important within the first 250 m; (2) for non-CSI, having employees in the CSI in close proximity (250–500 m) enhances their productivity; (3) for symbolic-based CSI firms, localisation economies—mainly understood as networking and/or knowledge externalities—have positive effects on TFP at shorter distances (less than 500 m), while for the two other knowledge-based CSI (i.e. synthetic and analytical) localisation economies seem not to be so important; and (4) market potential does not offset localisation economies for CSI. These results strongly suggest the importance of agglomeration externalities in CSI, which are strongly concentrated in the largest cities. © 2019, Springer Science+Business Media, LLC, part of Springer Nature.

This study explores the relationship between agglomeration economies and industrial productivity between 1980 and 2010 in Ecuador. The measure of productivity used is labour productivity. We conclude that urbanization economies have a positive impact on productivity in the period analyzed.

We consider whether external urban economic advantages (agglomeration economies) vary with time and space using detailed micro-data on 134 locations in New Zealand for the period 1976–2018. We find subtle temporal variation, with estimates of agglomeration economies peaking in 1991 and then falling by approximately 1 percentage point in the subsequent 15-years. Since 2006, however, estimates have remained broadly stable; the world has not been getting “flatter”. Our results reveal more significant spatial variation: Large cities offer net benefits in production but not consumption, whereas small locations close to large cities (“satellites”) experience agglomeration economies that are stronger than average.

Since the launch of the Đổi Mới (economic renovation) reforms in 1986, Vietnam has successfully transformed its economy. Real GDP per capita growth has averaged 5.5 percent a year since 1990, with the result that real GDP per capita has more than quadrupled. In addition to being rapid, Vietnam’s growth has been stable—the volatility in annual GDP growth per capita over 1991–2014 was among the lowest in the world. The impact on poverty reduction in Vietnam has been even more pronounced. Per capita income of the bottom 40 percent has grown by 9 percent a year since the early 1990s. Based on the global poverty line of 1.90 Dollars a day, the poverty rate declined steeply, from 50 percent in the early 1990s to just 3 percent in 2012. The decades of rapid economic growth in Vietnam have been accompanied by urbanization and spatial transformation. In 1986 fewer than 13 million residents, or 20 percent of Vietnam’s population, lived in areas officially classified as urban. By 2017 that number had grown to 30 million, or 35 percent of the population, with urban areas contributing over half of national GDP. From 2009 to 2014, the average annual population growth rate in urban areas was a brisk 3.3 percent (General Statistics Office of Vietnam, 2016). The urbanization process has been associated with the movement of workers and their households from rural areas to urban areas and workers in the agriculture sector to the industrial and service sectors in urban centers. It has also been associated with natural population growth in urban areas. In dealing with urbanization, the country has mounted an impressive record of keeping rural–urban and regional disparities in check through the promotion of rural industrialization and central transfers aimed at poorer areas. These transfers have allowed the expansion of basic services and infrastructure. The recommendations in this report have three layers: two policy principles, two overarching strategies, and three areas of policy actions. The two policy principles are (1) fostering positive agglomeration economies and better managing the negative congestion forces in leading urban centers and (2) promoting regional integration to boost labor mobility and, more generally, factor mobility, thereby fostering agglomeration in the right places (both overall and within each tier). These two policy principles should be supported by two overarching strategies: (1) ensuring universal access to quality education, health, and other basic services and (2) adopting a spatially differentiated strategy. In the long run, regional integration connects people and firms in poorer areas with those in richer ones through enhanced migration flows and better connectivity, counteracting regional divergence.

We evaluate the evolution of productivity gains in cities in the People's Republic of China between 2002 and 2013. In 2002, rural migrants exerted a strong positive externality on the earnings of urban residents, which were also higher on average in cities with access to foreign markets through a seaport. In 2007 and 2013, city size (measured in terms of both employment density and land area) was the crucial determinant of productivity. Market access, whether internal or external, played no direct role. Rural migrants still enhanced urban residents’ earnings in 2007 and 2013, though the effect was less than half that in 2002. Urban gains and their evolution over time are very similar on a total and a per hour earnings basis. Finally, skilled workers and females experienced slightly larger gains than unskilled workers and males.

This paper attempts to shed the light on the nexus between firms’ productivity and economies of agglomeration in Egypt. Using a large dataset of firms in 342 firms’ four-digit activities in 27 regions (62,108 firms), we introduce three measures of agglomeration which are urbanization or firm diversification measured by the number of firms by governorate, localization and specialization measured by the average productivity by governorate and sector (generating externalities and knowledge spillovers) and finally competition measured by the number of firm operating in the same governorate and the same sector. We find strong evidence for the existence of agglomeration in Egypt after controlling for firm age, location, economic activity and legal status. In the Egyptian context, productivity spillovers gained from agglomeration measures outweighed the negative effects of competition implied by congestion. The latter is chiefly due to the lack of good infrastructure. When regressions are run by firm size, location and activity, our main findings show first that micro and small firms are more likely to benefit from localization and diversification compared to medium and large firms. Service firms benefit more from high level of diversification while manufacturing firms gain more benefits from knowledge spillovers and specialization in Egypt.

We employ finely geo-coded firm-level panel data to assess the long-standing question whether agglomeration economies derive from specialization (within-industry), diversity (between-industry) or overall density. Rather than treating the city as a single unit, we focus our analysis on how the inner industry structures of cities influence firm-level productivity. Our results illustrate the co-existence of several externalities that differ in their spatial distribution and attenuation within cities. First, we find robust positive effects of neighborhood-level specialization on TFP as well as a small effect of diversity at the same fine spatial level. These effects are highly localized and dissipate beyond the immediate within-city neighborhood level. Second, we also find that firms benefit from the overall density of the wider city. The results emphasize the relevance of “opening up” cities to study the workings of their inner organization, and support the idea that location in a within-city industry cluster in a diversified and dense city boosts productivity.

We study the scaling of (i) numbers of workers and aggregate incomes by occupational categories against city size, and (ii) total incomes against numbers of workers in different occupations, across the functional metropolitan areas of Australia and the US. The number of workers and aggregate incomes in specific high income knowledge economy related occupations and industries show increasing returns to scale by city size, showing that localization economies within particular industries account for superlinear effects. However, when total urban area incomes and/or Gross Domestic Products are regressed using a generalised Cobb-Douglas function against the number of workers in different occupations as labour inputs, constant returns to scale in productivity against city size are observed. This implies that the urbanization economies at the whole city level show linear scaling or constant returns to scale. Furthermore, industrial and occupational organisations, not population size, largely explain the observed productivity variable. The results show that some very specific industries and occupations contribute to the observed overall superlinearity. The findings suggest that it is not just size but also that it is the diversity of specific intra-city organization of economic and social activity and physical infrastructure that should be used to understand urban scaling behaviors., Comment: 17 pages, 3 tables

There is a large and extensive literature examining the strength of agglomeration economies and, more generally, the determinants of spatial variations in productivity for developed countries. However, the corresponding literature for developing countries is comparatively scant. This paper contributes to filling this knowledge gap by providing estimates for city productivity premiums and different sources of agglomeration effects for 16 countries in the Latin America and Caribbean region. While two of the countries in our sample -- Brazil and Colombia -- have been considered by the literature, the remaining 14 countries have not been previously analyzed. The paper presents estimates for the region as well as comparable estimates for each country using a harmonized data set with characteristics of individual workers and features of the cities in which the workers live. In addition to examining the strength of agglomeration economies, the roles of human capital externalities and market access in explaining subnational productivity variations are assessed. The paper finds that citywide human capital externalities appear much stronger than agglomeration economies in explaining productivity variation in all the considered countries. There is considerable heterogeneity in the estimated strength of human capital externalities across countries, which could be a reflection of country differences in educational quality.

Cities with more roads are more productive. However, it can be unclear whether roads increase productivity directly, through improved intra-urban connections, or indirectly, by attracting more people. Our theory suggests that population responses may obscure the direct connectivity effects of roads. Indeed, conditional on population size, highway density does not affect productivity in a sample of US metropolitan areas. However, when exploiting exogenous variation in urban populations, we find that highway density improves agglomeration benefits: moving from the 50th to the 75th percentile of highway density increases the productivity-to-population elasticity from 2% to 4%. Moreover, travel-based measures outperform population size as a measure of agglomeration externalities.

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.

This paper examines the effects of agglomeration economies on firm‐level productivity in Vietnam. By using Vietnamese firm‐level data and the cluster detection method proposed by Mori and Smith (2013), we estimate the agglomeration economies for firm‐level productivity. Specifically, we consider the different effects of agglomeration economies for localization and urbanization, as well as across types of firms; state‐owned, private, and foreign‐owned firms. Furthermore, we decompose the agglomeration economies into the three sources of the effect; inter‐industry transaction relationships, knowledge spillovers, and labor pooling. We find the following results. First, localization economies actually improve firm‐level productivity in Vietnam, with firms in the clustered areas having higher productivities. However, the localization economies do not improve the productivity of the state‐owned firms. Second, urbanization economies improve productivity only for foreign‐owned firms. State‐owned and private firms do not benefit from urbanization economies. From the decomposition of agglomeration economies, we find that agglomeration economies formed through transactions work only for private firms. On the other hand, agglomeration economies formed through knowledge spillovers and labor pooling work for foreign‐owned firms.

As cities increasingly become centers of economic growth and innovation, there is a need to understand their inner workings and organization in greater detail. We use ge-coded firm-level panel data at the sub-city level to assess the long-standing question whether agglomeration economies derive from specialization (within-industry) or diversity (between-industry). We show that these two types of externalities co-exist, but differ in their spatial distribution and attenuation within cities. There are robust positive effects of diversity and specialization on firms' TFP growth at the local within-city neighborhood level, especially for firms in high-tech and knowledge-intensive activities. While specialization effects are bound to the local sub-city level, we demonstrate a positive effect of overall diversity also at the city-wide level. The results resonate with the idea that urban economies provide a mix of industrial diversity and specialisation. A location in a within-city industry cluster in a diversified, large city appears to let firms enjoy the benefits of local industry-specific externalities, while reaping the general city-wide benefits of a diversified city.

Although many studies consider the spatial pattern of manufacturing plants in developing countries, the role of services as a driver of urbanization and structural transformation is still not well understood. Using establishment level data from India, this paper helps narrow this gap by comparing and contrasting the spatial development of services with that in manufacturing. The study during the 2001-2010 period suggests that (i) services are more urbanized than manufacturing and are moving toward the urban and, by contrast, the organized manufacturing sector is moving away from urban cores to the rural periphery; (ii) manufacturing and services activities are highly correlated in spatial terms and exhibit a high degree of concentration in just a few states and industries; (iii) manufacturing in urban districts has a stronger tendency to locate closer to larger cities relative to services activity; (iv) infrastructure has a significant effect on manufacturing output, while human capital matters more for services activity; and lastly, (v) technology penetration, measured by the penetration of the Internet, is more strongly associated with services than manufacturing. Similar results hold when growth in activity is measured over the study period rather than levels. Manufacturing and services do not appear to crowd each other out of local areas.

This paper examines the spatial organization of jobs in Kampala, the capital city of Uganda, and applies the Lucas and Rossi-Hansberg (2002) model to explain the observed patterns in terms of the agglomeration forces and the commuting costs of workers. The paper suggests that: (i) Economic activities are concentrated in the downtown -- beyond which employment is spatially dispersed. (ii) Geographically weighted regressions identify five potential subcenters in 2011; however, none of these contribute significantly to employment. When explaining the variation in employment density across localities in Kampala, the research highlights that (i) density falls by 23.5 percent per kilometer increase in distance from the nearest potential subcenter; (ii) an increase in local production externalities of 10 percent increases density by 3.7 percent; and (iii) production externalities in Kampala's potential subcenters are extremely weak to have any significant impact even on nearby tracts.

Chile is characterized as being a country with an extreme concentration of the economic activity around Santiago. In spite of this, and in contrast to what is found in many industrialized countries, income levels per inhabitant in the capital are below the country average and far from the levels in the wealthiest regions. This was a result of the weakness of agglomeration economies. At the same time, the mining cycles have had an enormous impact in the evolution of the location of economic activity, driving a high dispersion at the end of the 19th century with the nitrates (very concentrated in the space) and the later convergence with the cooper cycle (highly dispersed). In that context, this article describes the evolution of the location of economic activity in the long run, showing the tensions among Heckscher-Ohlin and New Economic Geography forces. I also offer a deeper analysis of the main drivers of this spatial distribution, focusing in the economic structure of the regions, the productivity levels of each specific economic sector and the evolution of market potential., Chile se caracteriza por ser un país con una concentración extrema de la actividad económica alrededor de Santiago. A pesar de ello, y en contraste con lo que se encuentra en muchos países industrializados, los niveles de ingreso por habitante de la capital están por debajo de la media del país y lejos de los niveles de las regiones más ricas. La explicación radicaría en la debilidad de las economías de aglomeración en estas zonas. Al mismo tiempo, los ciclos mineros han sido determinantes en la evolución de la localización de la actividad económica, provocando una alta dispersión al final del siglo XIX con el surgimiento de los nitratos (muy concentrados en el espacio) y la convergencia posterior con la aparición del ciclo del cobre (mucho más disperso). En el presente artículo se describe la evolución de la localización de la actividad económica en el largo plazo, confrontando las tensiones existentes entre las fuerzas Heckscher-Ohlin y las de la “Nueva Geografía Económica”. También se ofrece un análisis más profundo de los principales impulsores de esta distribución espacial, centrándose en factores relacionados con la estructura económica de las regiones, los niveles de productividad de cada sector económico específico y la evolución del potencial de mercado de las regiones.

This dissertation, consisting of three essays on the urban development in China, provides empirical evidence for three related but different topics: urban growth pattern, agglomeration effects in production (production-side benefits of cities), and agglomeration effects in consumption (consumption-side benefits of cities). The first essay examines the growth pattern of Chinese cities at prefectural level or above by applying a non-parametric analysis. The kernel regression reveals the coexistence of a divergent growth pattern for large cities and a convergent growth pattern for small cities. The analysis comparing two different kinds of population data shows that excluding migrant workers in the count of urban population would underestimate the size and growth of large cities, which implies that rural-urban migrants move to large cities disproportionately. The results suggest that policies trying to control the growth of large cities have been ineffective in the past two decades. Using plant-level data in China, the second essay finds that the mechanisms of agglomeration economies vary with industry groups, and there is strong evidence supporting that regional industrial dominance would limit localization economies and diminish the productivity of firms. However, the negative effects of regional industrial dominance seem to be mitigated by a large and diverse urban environment. The conclusion points to the productivity-enhancing effect of agglomeration, and a competitive industrial structure is crucial for the success of the on-going industrial transformation and upgrading in China. Using survey data from China, the third essay reveals a positive relationship between city size and various categories of household consumption expenditures in China. By addressing several potential econometric issues, the analysis finds strong evidence of the agglomeration effect in consumption, which points to the important role that large cities play in enhancing household consumption. Taken together, this dissertation concludes that large cities in China have been dominant during the rapid urbanization and tend to keep growing disproportionately. Large cities in China are more productive and provide higher consumption amenities than small cities. Therefore, a market-driven urbanization process would be more efficient and effective for enhancing both productivity and consumption in China.

This paper adopts multilevel analysis to study the agglomeration-performance nexus for domestic firms in sub-Saharan Africa. We show that contextual factors can explain up to 30 % of the variance in firms productivity, more than half of which depends on the geographic location. Our results show also that African firms productivity is positively correlated to the size of the agglomeration when they locate in larger cities specialized in different sectors, while the relation turns negative when they face direct competition from firms in the same industry. These effects are similar in the services and the manufacturing industries, even if in the latter positive spillovers are found to be conditional to the presence of backward and forward linkages with nearby firms. Finally, we are able to show that these effects are also confirmed when domestic firms locate close to foreign multinationals, especially those coming from the South.

In estimating agglomeration benefits across five OECD countries, this paper represents the first empirical analysis that contrasts cross-country evidence on agglomeration benefits with the productivity impact of metropolitan governance structures, while taking into account the potential sorting of individuals across cities. The comparability of results in a multi-country setting is supported through the use of a new internationally-harmonised definition of cities based on economic linkages rather than administrative boundaries. The analysis finds that cities with fragmented governance structures tend to have lower levels of productivity. The estimated elasticity for an increase in the number of local jurisdiction is 0.06, which is halved by the existence of a metropolitan governance body. The effect is sizeable, as the analysis confirms the result in the literature that city productivity increases with city size with an elasticity in the range of 0.02 to 0.05.

We assess the extent to which firms in an environment of decreasing transport costs and industrial transformation value the benefits of proximity to a historic CBD and agglomeration economies in their location decisions. Taking a hybrid perspective of classical bid-rent theory and a world where clustering of economic activity is driven by between-firm spillovers, Berlin, Germany, from 1890 to 1936 serves as a case in point. Our results suggest that the average productivity effect of a doubling of between- firm spillovers over the study period increases from 3.5% to 8.3%. As the city transforms into a service-based economy, several micro agglomerations emerge. Their locations close to the CBD still make the city look roughly monocentric. This is in line with a hysteresis effect in which second-nature geography drives the ongoing strength of a historic city center even though the importance of the originally relevant first-nature geography has vanished.