Manufacturing Agglomeration And Total Factor Productivity

For thirty years of reforming and opening up, China’s economic development hasmade remarkable achievements. With the rapid development of the economy and thedeepening of reform, there appears lots of industrial clustering phenomenon. Whenindustrial agglomeration promotes regional economic development, scholars began tostudy the impact on total factor productivity (TFP) of industrial agglomeration.Industrial agglomeration can improve the total factor productivity by means ofsharing infrastructure, overflowing of knowledge and technology, expanding theconnection among industries. Since the1990s, manufacturing in China has clustered inthe eastern coastal areas with the increasing agglomeration degree year by year, whichaccelerates the development of the economy and promotes the total factor productivityin this region. At present, most scholars carry out the research about the manufacturingagglomeration’s effects on total factor productivity from the perspective of industry.Different from the most scholars’ studies, this paper analyzes the effects from theperspective of enterprises.On the basis of related literature domestic and abroad, this paper clears up theinfluence mechanism of manufacturing agglomeration effects on total factorproductivity growth, then from the enterprise level, the micro data of Chinese industrialenterprises from1998to2007are applied to work out30manufacturing industriesagglomeration index (EG index). Results show that the agglomeration phenomenonexists in Chinese manufacturing industries on the whole, the clustering degree is still ina lower stage and has a tendency to increase year by year. Besides, the biggest rise is inmachinery and electronics manufacturing industry, the second is in the resourceprocessing and manufacturing industry.The LP method is adopted to estimate the total factor productivity (TFP) of theenterprise. On this basis, the relationship between firms’ TFP and manufacturingagglomeration is explored. The result of the empirical test is consistent with thetheoretical analysis, that is to say, the agglomeration is conducive to improve theenterprise total factor productivity, and there exists an "inverted U" betweenagglomeration and productivity. At the same time, this study also finds that the increaseof sales, research and development, the improvement of the labor productivity, percapita income level, and industrialization do benefit to the improvement of the totalfactor productivity. Compared with the industries of relatively low concentration of industry, the higher the degree of agglomeration is, the greater the contribution toenterprise productivity will be.Take the above theoretical analyses and experiments into consideration, this paperaims at putting forward some measures and suggestions to adjust the distribution ofmanufacturing industry in China rationally and enhance the level of total factorproductivity.