Study Of The Impact Of Industrial Agglomeration On Total Factor Productivity In The City

Total factor productivity (TFP) indicates the ability and endeavour performed by a nation or an area to develop its economics and avoid poverty. It is not only a general reflection to economy developing effect of various factors, but also the main power of economy development in the long term. Research in factors of TFP growth is especially vital to both the health of the economics and the economic sustainability in China. As industry agglomeration is an inevitable trend, the external returns brought by it will exert tremendous influence on economy through a variety of aspects, which is a very popular topic in economic research.This essay adopts panel data of municipal district of the cities in china from 2001 to 2007. In order to find the influences exerted by industry agglomeration economies on TFP growth and its different factors. On one hand, the stochastic frontier analysis is used to calculate TFP growth, frontier technical change, technical efficiency and the size of scale economies. On the other hand, agglomeration economy is measured by the density of economic activity and the scale of industry. This essay is trying to answer the following two questions. First, whether industry agglomeration is a key factor to TFP growth; Second, which factors in TFP growth are affected most by industry agglomeration.The result of empirical analysis indicates that industry agglomeration is a key factor to TFP growth in cities of China. The positive coefficients of industry agglomeration in all equations indicate that expansion of industry scales exert positive influence on TFP growth of city. There is 0.56% increase in TFP with 1% increase in industry scale. The density of economic activity affects TFP growth mainly through frontier technical change. If density of industry activity increases 1%, TFP growth will decrease 0.6%. This means industry of cities is unduly developed, and it begets a bad economy structure, adversely affecting productivity. The level of economy nationalization exerts adverse influence on TFP growth, technical efficiency and scale economies, but positive influence on frontier technical change. Transportation condition is also a key factor which may result in industry agglomeration and promote TFP growth and its factors. Expenses on education from governments can improve technical efficiency and benefit scale economies. It has slightly positive effect on TFP growth. At last, healthcare condition has no obvious influence on TFP growth, as the adverse influence it exerts on technical efficiency and scale economies counteracts the positive influence it exerts on frontier technical change.