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Where do new firms locate? The effects of agglomeration on the formation and scale of operations of new firms in Punjab

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  • Haroon, Maryiam
  • Chaudhry, Azam

Abstract

The formation of new firms is an important determinant of economic development and the industrial organization literature highlights agglomeration as one of the main factors affecting the formation and scale of operations of new firms. This paper is one of the first to use developing country data to estimate the impact of localization (the benefits accruing to firms that choose to locate in a specific region within a specific industry) and urbanization (the benefits accruing to firms located close to each other regardless of the type of industry to which they belong) on new firms' formation and scale of operations. Our findings reveal that agglomeration measured through density of employment has a significant impact on the formation of new firms and on their scale of operations in Punjab.

Suggested Citation

  • Haroon, Maryiam & Chaudhry, Azam, 2014. "Where do new firms locate? The effects of agglomeration on the formation and scale of operations of new firms in Punjab," Economics Discussion Papers 2014-21, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwedp:201421
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    References listed on IDEAS

    as
    1. Theresa Thompson Chaudhry, 2011. "Contracting and Efficiency in the Surgical Goods Cluster of Sialkot, Pakistan," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 12(1), pages 91-115, March.
    2. Edward L. Glaeser & Glenn Ellison, 1999. "The Geographic Concentration of Industry: Does Natural Advantage Explain Agglomeration?," American Economic Review, American Economic Association, vol. 89(2), pages 311-316, May.
    3. Mercedes Delgado & Michael E. Porter & Scott Stern, 2010. "Clusters and entrepreneurship," Journal of Economic Geography, Oxford University Press, vol. 10(4), pages 495-518, July.
    4. André van Stel & Niels Bosma & Kashifa Suddle, 2006. "The Geography of New Firm Formation: Evidence from Independent Start-ups and New Subsidiaries in the Netherlands," Scales Research Reports H200615, EIM Business and Policy Research.
    5. Azam Chaudhry & Marjan Nasir & Maryiam Haroon, 2012. "The Birth of Exporters: Entry and Scale of Firms in Punjab’s Export Sectors," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 17(Special E), pages 191-212, September.
    6. Theresa Thompson Chaudhry, 2005. "Industrial Clusters in Developing Countries: A Survey of the Literature," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 10(2), pages 15-34, Jul-Dec.
    7. Theresa Thompson Chaudhry, 2010. "Relational Contracting in Pakistan’s Surgical Instrument Cluster: An Empirical Study," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 49(3), pages 213-237.
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    Cited by:

    1. Theresa Chaudhry & Muhammad Haseeb & Maryiam Haroon, 2017. "Economic geography and misallocation in Pakistan’s manufacturing hub," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 59(1), pages 189-208, July.

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    More about this item

    Keywords

    agglomeration; firms; localization; urbanization;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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