Testing Urbanization Economies in Manufacturing Industries: Urban Diversity or Urban Size?

19 Pages Posted: 27 Jul 2011

See all articles by Shihe Fu

Shihe Fu

Xiamen University - The Wang Yanan Institute for Studies in Economics (WISE)

Junjie Hong

University of International Business and Economics (UIBE) - School of International Trade and Economics

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Date Written: August 2011

Abstract

Whether urbanization economies stem from urban diversity or urban scale is not clear in the literature. This paper uses the 2004 China manufacturing census data and tests simultaneously the effects of urban size and industrial diversity on firm productivity, controlling for localization economies and human capital externalities. We find that productivity increases with city size - but at a diminishing rate, and the city size effect becomes negative for cities with population over two million. Firms also benefit from industrial diversity, and the strength of such benefit increases with city size but decreases with firm size. The characteristics of agglomeration economies in a transition economy are also discussed.

Suggested Citation

Fu, Shihe and Hong, Junjie, Testing Urbanization Economies in Manufacturing Industries: Urban Diversity or Urban Size? (August 2011). Journal of Regional Science, Vol. 51, Issue 3, pp. 585-603, 2011. Available at SSRN: https://ssrn.com/abstract=1895918 or http://dx.doi.org/10.1111/j.1467-9787.2010.00702.x

Shihe Fu (Contact Author)

Xiamen University - The Wang Yanan Institute for Studies in Economics (WISE) ( email )

A 307, Economics Building
Xiamen, Fujian 361005
China

Junjie Hong

University of International Business and Economics (UIBE) - School of International Trade and Economics ( email )

10 East Huixin Street
Chaouang District
Beijing, 100029
China

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