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Firm sorting, clustering, and vertical disintegration: Evidence from China

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  • Quan, Yingyue

Abstract

Using universal firm-level data on the garment sector in Pearl River Delta, China, we show that clustered firms are more likely to be vertically disintegrated. Additionally, an increase in clustering and vertical disintegration is observed following China’s accession to the World Trade Organization. However, most models of changes in agglomeration forces fail to explain these findings. Contrary to the commonly held view that high-productivity firms sort into clusters, we show that agglomeration can disproportionately benefit less productive firms when the agglomeration force is input sharing. Empirical evidence supports this view.

Suggested Citation

  • Quan, Yingyue, 2025. "Firm sorting, clustering, and vertical disintegration: Evidence from China," Regional Science and Urban Economics, Elsevier, vol. 110(C).
    • Handle: RePEc:eee:regeco:v:110:y:2025:i:c:s0166046224000978
    DOI: 10.1016/j.regsciurbeco.2024.104066
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    More about this item

    Keywords

    Clustering; Vertical disintegration; Firm sorting; Garment manufacturing;
    All these keywords.

    JEL classification:

    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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