Plants’ Self-Selection, Agglomeration Economies and Regional Productivity in Chile
Obihiro University of Agriculture & Veterinary Medicine
Oregon State University - Department of Agricultural and Resource Economics
Journal of Economic Geography, Vol. 9, Issue 4, pp. 539-558, 2009
In this study, we assess the relative contribution of plants’ self-selection and agglomeration economies to a region's productivity level. We focus on manufacturing plants by region in the Chilean food industry, which is not only a major source of employment and exports but also spatially dispersed. Our estimation of plant-level productivity corrects for possible simultaneity between productivity and conventional inputs and plants’ self-selection to locate in specific markets. Moreover, we account for three sources of externalities: localization, urbanization and demand-driven scale economies in our estimation. Then, a censored regression model relates regional productivity-distribution measures to agglomeration economies. We find that high-productivity (exporting) plants locate in a region where other plants in food industry agglomerate, industrial structure is diversified and market size is large. Our results suggest that plants’ self-selection outweighs the contribution of agglomeration economies in increasing a region's productivity level.
Keywords: economic geography, exporters, plant and regional productivity distribution
JEL Classification: R12, R30, L11
Date posted: June 22, 2009