Sectoral Manufacturing Productivity Growth in Korean Regions

Abstract

The growth of an industry in a city has been explained by dynamic externality theories such as those by Marshall, Arrow and Romer, Porter, Jacobs and Storper. Each of these views describes a different mechanism by which the initial conditions for a particular industry in a city facilitate knowledge spillover extensive enough to promote productivity growth. This paper develops a model that distinguishes among these and applies it to Korean manufacturing industries. The empirical analysis concludes that productivity growth in Korea is more rapid when small firms from different industries compete, supporting theories by Jacobs and Storper. However, the impacts of specialisation and diversification vary substantially across major manufacturing industry sub-categories. Land use regulations such as greenbelt rates and excessive concentration control districts generally show significant negative effects on productivity growth.

Who's right, Marshall or Jacobs? The localization versus urbanization debate

“…In their study on productivity growth, Lee et al (2005) show that competition (Porter) and diversity (Jacobs) yield positive effects while specialisation (MAR) are negative (or non significant when diversity is included, the two measures being correlated at -0.68). They also find that competition has a positive effect on productivity growth for technologically oriented industries and that Jacobs' model better suits the traditional light industry and the heavy industry in Korea (which partially contrast the results of Nakamura (1985) Glaeser et al (1992) interpret the number of firms per worker as a measure of the degree of local competition.…”

“…Porter or competition externalities in their models of agglomeration economies (see for instance, Baptista and Swann, 1999;Lee et al, 2005;Van Oort , 2002;Van Oort and Stam, 2006). Table 1 presents the sources of spillovers according to these theories.…”

Agglomeration Economies: An Analysis of the Determinants of Employment in the Cities of Ecuador

“…A large body of literature seeks to quantify such effects in different countries and geographic scales. The results support the presence of positive effects in urban growth of diversity (economic concentration of a market) and competition [26][27][28][29], while the results with respect to specialization are more ambiguous [13,[30][31][32][33].…”

Concentration, Diversity, and Manufacturing Performance

“…Jacobs (1969) argues that the cross-fertilization of ideas across industries enabled by diversity is crucial for regional economic dynamism. Such inter-industry spillovers are sometimes termed "Jacobs externalities" and have been tested repeatedly in comparison to Marshall's ([1890] 1910) concept of intra-industry knowledge spillovers (Glaeser et al 1992;Henderson et al 1995;Lee et al 2005). In the long run, these benefits may lead to additional advantageous outcomes associated with general economic good fortune, such as long-term employment growth, firm births, increased innovation, and expansion of regional labor productivity and population (e.g., Friedman 1995;Quigley 1998;Feldman and Audretsch 1999;Hanson 2001;Armington and Acs 2002;Essletzbichler and Rigby 2002;Dissart 2003;Henderson 2003;Holl 2004b;2004a;Rosenthal and Strange 2004;Lall and Chakravorty 2005;Shearmur and Polese 2007).…”