Heterogeneous Enterprises And City Agglomeration Economies

Based on micro-firm level data of Chinese Industrial enterprise database from 1998 to 2007 and macro-demographic data of CEIC database, for the frist time, we estimates micro-enterprises’raw-TFP, which is weeding out the direct impact of agglomeration economies from enterprises’TFP, in our country, and using percentile regression to investigate the relationship between urban agglomeration and heterogeneous enterprises’productivity. The main contribution of this paper:1) Successfully solved the endogeneity problem between agglomeration economies and enterprises’TFP.2) Both in the aggregate industry level and specific industry level, studies the relationship between the heterogeneity enterprise and urban agglomeration economies, and we find that, General equipment manufacturing industry showing urbanization economies and electronic equipment manufacturing industry showing localization economies.3) Finally, through percentile regression method, we find that high-productivity firms can get more spillover externalities from agglomeration economies, while low-productivity firms can obtain fewer spillover externalities from agglomeration economies, providing an empirical support for Baldwin and Okubo (2006) theoretical model.In the Empirical part, Firstly, in the aggregate industry level, using micro data to investigate the relationship between urban agglomeration and heterogeneous enterprises’ productivity. Secondly, in the industry level, we choose General equipment manufacturing industry and electronic equipment manufacturing economy as the research object. Finally, comparing the the empirical results and make our conclusion.In policy recommendations aspect, we argue that Urban Productivity and city size was positively correlated and Metropolitan shows strong urbanization economies, Metropolitan should develop a diversified economy; In firm aspect, we argue that High productivity enterprises should enter cities with strong agglomeration and relatively high degree of specialization in his industry, Low productivity enterprises should choose to enter cities with a strong diversified economic and relatively low degree of specialization in his industry.