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Agglomeration Economies and Productivity Growth in Manufacturing Industry: Empirical Evidence from Indonesia

Author

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  • Wahyu Widodo
  • Ruhul Salim
  • Harry Bloch

Abstract

type="main" xml:id="ecor12115-abs-0001"> This study examines the effect of agglomeration economies on productivity growth in Indonesian manufacturing industries during the first decade of this century. Productivity growth is measured at the firm level using the Färe-Primont Productivity Index. Each firm's productivity growth is then regressed against a set of firm and industry characteristics, including three measures of agglomeration representing the effects of specialisation, diversity and competition. The results show evidence of a positive specialisation effect and a negative diversity effect for aggregate manufacturing and sub-sectors. Furthermore, there are mixed effects across industries, suggesting that Porter's competition externalities stimulate firm productivity growth under some conditions but not others.

Suggested Citation

  • Wahyu Widodo & Ruhul Salim & Harry Bloch, 2014. "Agglomeration Economies and Productivity Growth in Manufacturing Industry: Empirical Evidence from Indonesia," The Economic Record, The Economic Society of Australia, vol. 90, pages 41-58, June.
    • Handle: RePEc:bla:ecorec:v:90:y:2014:i::p:41-58
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    File URL: http://hdl.handle.net/10.1111/ecor.2014.90.issue-s1
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    Citations

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    Cited by:

    1. Adiwan F. Aritenang, 2021. "The Importance of Agglomeration Economies and Technological Level on Local Economic Growth: the Case of Indonesia," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 12(2), pages 544-563, June.
    2. Hashiguchi, Yoshihiro & Higashikata, Takayuki, 2017. "Human capital externalities in Indonesian cities," IDE Discussion Papers 672, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    3. María Molinos-Senante & Alexandros Maziotis & Ramon Sala-Garrido, 2017. "Assessment of the Total Factor Productivity Change in the English and Welsh Water Industry: a Färe-Primont Productivity Index Approach," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 31(8), pages 2389-2405, June.
    4. Omphile Temoso & Lindikaya W. Myeki, 2023. "Estimating South African Higher Education Productivity and Its Determinants Using Färe-Primont Index: Are Historically Disadvantaged Universities Catching Up?," Research in Higher Education, Springer;Association for Institutional Research, vol. 64(2), pages 206-227, March.
    5. Viet Nguyen, Thanh & Simioni, Michel & Le Van, Dao, 2019. "Assessment of TFP change at provincial level in Vietnam: New evidence using Färe–Primont productivity index," Economic Analysis and Policy, Elsevier, vol. 64(C), pages 329-345.
    6. Bianca Francisco Garcia Benavides & Fernando Gomez-Zaldivar, 2023. "Key factors for productive diversification: opportunities for the design of regional industrial strategies in Mexico (Factores clave para la diversificacion productiva: oportunidades para el diseño d," Sobre México. Revista de Economía, Sobre México. Temas en economía, vol. 1(8), pages 69-93.
    7. Briec, Walter & Kerstens, Kristiaan & Prior, Diego & Van de Woestyne, Ignace, 2018. "Testing general and special Färe-Primont indices: A proposal for public and private sector synthetic indices of European regional expenditures and tourism," European Journal of Operational Research, Elsevier, vol. 271(2), pages 756-768.
    8. Khanindra Ch. Das & Mantu Kumar Mahalik, 2021. "Assessment of Overseas Subsidiary Survival in Chinese Provinces: A Longitudinal Study of Indian Multinationals," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 54(2), pages 190-207, June.
    9. Khoirunurrofik, 2018. "Local economic structure, productivity growth, and industry life cycle: evidence from Indonesia," Asia-Pacific Journal of Regional Science, Springer, vol. 2(2), pages 453-475, August.
    10. Lu, Ren & Ruan, Min & Reve, Torger, 2016. "Cluster and co-located cluster effects: An empirical study of six Chinese city regions," Research Policy, Elsevier, vol. 45(10), pages 1984-1995.
    11. Khaled Thabet, 2015. "Industrial structure and total factor productivity: the Tunisian manufacturing sector between 1998 and 2004," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 54(2), pages 639-662, March.

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