Impacts of agglomeration economies on Vietnamese firm productivity
Main Article Content
Abstract
Economic agglomeration or economic concentration is one of the primary drivers of development, and this effect is triggered by urbanization in large cities or specialization in small to medium-sized cities. The authors calculate using a dataset containing 432.100 observations of 86420 businesses operating continuously for 9 years from 2012 to 2020 to analyze the effect of economic agglomeration on the productivity of Vietnamese businesses. This study applied a panel data model with robust estimation to quantify the relationship between economic agglomeration analysis and business labor productivity. The results demonstrate that economic concentration has a noticeable effect on the productivity of Vietnamese businesses. Specifically, the degree of urbanization and competition has a negative effect on the productivity of Vietnamese businesses, whereas the residual effects brought about by localization contribute to an increase in labor productivity. Therefore, industry or regional development policies should focus on stimulating positive spillover effects from agglomeration to promote enterprise productivity.
Article Details
Keywords
Agglomeration, Firm productivity, Urbanization
References
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Esiyok, B., & Ugur, M. (2017). A spatial regression approach to FDI in Vietnam: Province-level evidence. The Singapore Economic Review, 62(02), 459-481. https://doi.org/10.1142/S0217590815501155.
Fan, C. C., & Scott, A. J. (2003). Industrial agglomeration and development: A survey of spatial economic issues in East Asia and a statistical analysis of Chinese regions. Economic Geography, 79, 295–319.
Gokan, T., Kuroiwa, I., & Nakajima, K. (2019). Agglomeration economies in Vietnam: A firm-level analysis. Journal of Asian Economics, 62, 52-64. https://doi.org/10.1016/j.asieco.2019.03.002.
Hai Nguyen-Chi, ChuongH N, DuyenPham-My, TuanNguyen-Anh, & TrungTra-Van (2022). Spatial Clustering of Manufacturing Firms in Vietnam. International Journal of Economics and Finance Studies, 14(1), 116-137. Doi: 10.34109/ijefs. 202220004.
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Lall, S. V., Shalizi, Z., & Deichmann, U. (2004). Agglomeration economies and productivity in Indian industry. Journal of Development Economics, 73(2), 643-673.
Lee, B. S., Jang, S., & Hong, S. Y. (2010). Marshall's scale economies and Jacobs' externality in Korea: The role of age, size and the legal form of organization of establishments.Urban Studies, 47, 3131–3156.
Lee, T. L. (2006). Action strategies for strengthening industrial clusters in southern Taiwan. Technology in Society, 28(4), 533-552. https://doi.org/10.1016/j.techsoc.2006.09.007.
Lin, H. L., Li, H. Y., & Yang, C. H. (2011). Agglomeration and productivity: Firm-level evidence from China's textile industry. China Economic Review, 22(3), 313-329. https://doi.org/10.1016/j.chieco.2011.03.003.
Martin, P., & Ottaviano, G. I. (2001). Growth and agglomeration. International economic review, 42(4), 947-968. https://doi.org/10.1111/1468-2354.00141.
Nguyen Chi Hai, Huynh Ngoc Chuong & Tra Trung (2022). Linkages and development of local industrial space: Research in the key economic region of Southern Vietnam. Cogent Economics & Finance, 10(1), 2109273. https://doi.org/10.1080/23322039.2022.2109273
Potter, A., & Watts, H. D. (2011). Evolutionary agglomeration theory: increasing returns, diminishing returns, and the industry life cycle. Journal of economic geography, 11(3), 417-455. https://doi.org/10.1093/jeg/lbq004
Rand, J., Tarp, F., Trifkovic, N., & Zille, H. (2019). Industrial agglomeration in Myanmar (No. 2019/3). WIDER Working Paper. https://doi.org/10.35188/UNU-WIDER/2019/637-1
Renski, H. (2011). External economies of localization, urbanization and industrial diversity and new firm survival. Papers in Regional Science, 90(3), 473-502.
Scott, A. J. (1994). Variations on the theme of agglomeration and growth: the gem and jewelry industry in Los Angeles and Bangkok. Geoforum, 25(3), 249-263. https://doi.org/10.1016/0016-7185(94)90030-2.
Wei, W., Zhang, W. L., Wen, J., & Wang, J. S. (2020). TFP growth in Chinese cities: The role of factor-intensity and industrial agglomeration. Economic Modelling, 91, 534-549. https://doi.org/10.1016/j.econmod.2019.12.022
Amornkitvikai, Y., Harvie, C., & Sangkaew, P. (2023). The role of wages, skills development and R&D on productivity: evidence from Thai manufacturing firms. Journal of Economic Studies, 50(2), 324-342. https://doi.org/10.1108/JES-06-2021-0282
Andersson, M., & Lööf, H. (2011). Agglomeration and productivity: evidence from firm-level data. The Annals of Regional Science, 46, 601-620. https://doi.org/10.1007/s00168-009-0352-1
Antonietti, R., & Cainelli, G. (2011). The role of spatial agglomeration in a structural model of innovation, productivity and export: a firm-level analysis. The Annals of Regional Science, 46, 577-600. https://doi.org/10.1007/s00168-009-0359-7
Badr, K., Rizk, R., & Zaki, C. (2019). Firm productivity and agglomeration economies: evidence from Egyptian data. Applied Economics, 51(51), 5528-5544. https://doi.org/10.1080/00036846.2019.1613506.
Bộ Chính trị (2018). Nghị quyết 23-NQ/TW về định hướng xây dựng chính sách phát triển công nghiệp quốc gia đến năm 2030, tầm nhìn đến năm 2045, ban hành ngày 22 tháng 3 năm 2018.
Castiglione, C. (2008). ICT investments and technical efficiency in Italian manufacturing firms: the productivity paradox revisited (No. tep0408). Trinity College Dublin, Department of Economics.
Chang, C. L., & Oxley, L. (2009). Industrial agglomeration, geographic innovation and total factor productivity: The case of Taiwan. Mathematics and Computers in Simulation, 79(9), 2787-2796. https://doi.org/10.1016/j.matcom.2008.09.003
Ciccone, A., & Hall, R. (1996). Productivity and the Density of Economic Activity. American Economic Review, 86(1), 54-70.
Cổng thông tin điện tử Chính phủ (2015). Quyết định 32/QĐ-TTg của Thủ tướng chính phủ về việc phê duyệt Chương trình đồng bộ phát triển và nâng cấp cụm ngành và chuỗi giá trị sản xuất các sản phẩm có lợi thế cạnh tranh: Điện tử và công nghệ thông tin, dệt may, chế biến lương thực thực phẩm, máy nông nghiệp, du lịch liên quan, ban hành ngày 13 tháng 1 năm 2015. https://vanban.chinhphu.vn/default.aspx?pageid=27160&docid=178588
Esiyok, B., & Ugur, M. (2017). A spatial regression approach to FDI in Vietnam: Province-level evidence. The Singapore Economic Review, 62(02), 459-481. https://doi.org/10.1142/S0217590815501155.
Fan, C. C., & Scott, A. J. (2003). Industrial agglomeration and development: A survey of spatial economic issues in East Asia and a statistical analysis of Chinese regions. Economic Geography, 79, 295–319.
Gokan, T., Kuroiwa, I., & Nakajima, K. (2019). Agglomeration economies in Vietnam: A firm-level analysis. Journal of Asian Economics, 62, 52-64. https://doi.org/10.1016/j.asieco.2019.03.002.
Hai Nguyen-Chi, ChuongH N, DuyenPham-My, TuanNguyen-Anh, & TrungTra-Van (2022). Spatial Clustering of Manufacturing Firms in Vietnam. International Journal of Economics and Finance Studies, 14(1), 116-137. Doi: 10.34109/ijefs. 202220004.
Henderson, J. V. (2003). Marshall's scale economies. Journal of Urban Economics, 53, 1–28.
Jacobs, J., 1969. The economies of cities, NY: Random House. https://doi.org/10.1002/ncr.4100580916.
Jianlei, Z., Na, A., & Longdi, C. (2021). Agglomeration and total factor productivity of China's textile industry. Industria Textila, 72(4), 443-448. https://doi.org/10.35530/IT.072.04.202013.
Lall, S. V., Shalizi, Z., & Deichmann, U. (2004). Agglomeration economies and productivity in Indian industry. Journal of Development Economics, 73(2), 643-673.
Lee, B. S., Jang, S., & Hong, S. Y. (2010). Marshall's scale economies and Jacobs' externality in Korea: The role of age, size and the legal form of organization of establishments.Urban Studies, 47, 3131–3156.
Lee, T. L. (2006). Action strategies for strengthening industrial clusters in southern Taiwan. Technology in Society, 28(4), 533-552. https://doi.org/10.1016/j.techsoc.2006.09.007.
Lin, H. L., Li, H. Y., & Yang, C. H. (2011). Agglomeration and productivity: Firm-level evidence from China's textile industry. China Economic Review, 22(3), 313-329. https://doi.org/10.1016/j.chieco.2011.03.003.
Martin, P., & Ottaviano, G. I. (2001). Growth and agglomeration. International economic review, 42(4), 947-968. https://doi.org/10.1111/1468-2354.00141.
Nguyen Chi Hai, Huynh Ngoc Chuong & Tra Trung (2022). Linkages and development of local industrial space: Research in the key economic region of Southern Vietnam. Cogent Economics & Finance, 10(1), 2109273. https://doi.org/10.1080/23322039.2022.2109273
Potter, A., & Watts, H. D. (2011). Evolutionary agglomeration theory: increasing returns, diminishing returns, and the industry life cycle. Journal of economic geography, 11(3), 417-455. https://doi.org/10.1093/jeg/lbq004
Rand, J., Tarp, F., Trifkovic, N., & Zille, H. (2019). Industrial agglomeration in Myanmar (No. 2019/3). WIDER Working Paper. https://doi.org/10.35188/UNU-WIDER/2019/637-1
Renski, H. (2011). External economies of localization, urbanization and industrial diversity and new firm survival. Papers in Regional Science, 90(3), 473-502.
Scott, A. J. (1994). Variations on the theme of agglomeration and growth: the gem and jewelry industry in Los Angeles and Bangkok. Geoforum, 25(3), 249-263. https://doi.org/10.1016/0016-7185(94)90030-2.
Wei, W., Zhang, W. L., Wen, J., & Wang, J. S. (2020). TFP growth in Chinese cities: The role of factor-intensity and industrial agglomeration. Economic Modelling, 91, 534-549. https://doi.org/10.1016/j.econmod.2019.12.022
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