Agglomeration economies and productivity in Indian industry

Abstract

The primary objective of this paper is to examine the extent to which agglomeration economies contribute to economic productivity. We distinguish three sources of agglomeration economies: (1) at the firm level from improved access to market centers, (2) at the industry level from intra-industry localization economies, and (3) at the regional level from inter-industry urbanization economies. There is considerable variation in the sources and magnitudes of agglomeration economies between industrial sectors-in particular, our results indicate that access to markets through improvements in inter-regional infrastructure is an important determinant of firm level productivity, whereas benefits of locating in dense urban areas do not appear to offset associated costs. D

Agglomeration and productivity in China: Firm level evidence

“…Congestion may be especially severe if infrastructure is a bottleneck to economic activities. For instance, Lall, Shalizi, and Deichmann (2004) found that geographic concentration of the same industry lowers the productivity of Indian firms, whereas access to markets through improvement in inter-regional infrastructure has favorable effect. Furthermore, the fiercer competition in product and factor markets can suppress a firm's mark-up and productivity through lower product prices and higher inputs costs.…”

Economic structure, productivity, and infrastructure quality in Southern Mexico

“…Summary statistics such as the total road length in a state/province or straight-line distance to ports or urban agglomerations are poor proxies for the complexity inherent in a national or regional transportation network. We therefore use a digital geographic representation of Mexico's transport network to compute an index of accessibility for each municipio as a simple measure of accessibility and potential market integration (see Lall et al 2004). The index summarizes the size of the potential market that can be reached from a particular point given the density and quality of the transport network within that region.…”

Concentration, congestion, and the dynamics: spatial re-modeling of the Murphy, Shleifer, and Vishny model

“…Using terminology from Fujita et al (2000), all of these positive externalities are "centripetal forces" that will benefit the industry, and according to O'Sullivan (2003), the economy will enjoy lower costs and higher productivity. Thus, in the MSV model, F will be a decreasing function of n, and α will be an increasing function of n. In addition to supply-side externality, agglomeration economies will be realized in the form of "thick-market externalities," which will reduce asymmetric information for consumers and will give them better opportunities to compare the prices and quality of goods (Lall et al 2004).…”

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