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Self-selection Or Agglomeration Economies?——Firm-level Evidence From China's Textile Industry
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TitleSelf-selection Or Agglomeration Economies?——Firm-level Evidence From China's Textile Industry  
AuthorLuo Yong, Cai Zhengzhe, and Fan Zuojun  
OrganizationHuazhong University of Science and Technology;Business School, Guangxi University, 
Key WordsFirm Heterogeneity; Total Factor Productivity; Self-selection Effect; Agglomeration Economies Effect; ‘New’ New Economic Geography 
Abstract Firms are more productive on average in industrial clusters. Whether it is based on the self-selection effect of heterogeneous firms or based on the agglomeration economies effect of externalities? To examine these two sources of spatial productivity differences, we construct a combined model of selection effect and agglomeration effect, and put forward identification method and empirical hypothesis aiming at two effects. Based on a panel dataset of Chinese Cotton and textile processing industry from the database of Chinese industrial enterprises from 1998 to 2007, the paper investigates the relationship between firm density and productivity distribution in cities. The result indicates that higher firm density means higher average productivity, higher productivity distribution dispersion and more obvious left-truncation effect, but no right-shift in distribution. It implies that only self-selection effect exists in China's Textile clusters. In further robustness checks, the paper confirms the previous conclusions and excludes the possibility of the impact on the firms from agglomeration externalities in other forms with firm-level data. It also signifies that there exists a possibility that traditional research overestimates agglomeration externalities because of overlooking self-selection effect. 
Serial NumberWP375 
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