Abstract
This paper examines the effects of dynamic agglomeration economies on the productivity growth of the industries in Indonesia’s regions. The study introduces employment market potential into the city-industry growth estimation for controlling local size and preventing overestimation of the agglomeration effects. The results suggest that both specialization and diversity are important for city-industry growth and that some externalities are stronger in different time periods. The effects of specialization and diversity on medium-term growth (2000–2010) are stronger than on long-term growth (1990–2010), in addition to new positive effects of competition. A detailed analysis across industries reveals a strong relationship between local industrial structure and performance—productivity and employment growth—which is associated with industry maturity within its lifecycle stages.
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14 March 2018
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Notes
City size is classified into three categories: “small–medium” (population under 500,000), “large” (population between 500,000 and 1,000,000), and “metro-megapolitan” (population over 1,000,000).
For instance, Rosenthal and Strange (2004) found that the impact of city size on productivity is between 3 and 8%.
Stata command “levpet” created by Petrin et al. (2004) was used to estimate the plant-level production function.
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Acknowledgement
I would like to thank to Muhammad Irfan Shaleh for sharing the GIS Euclidean-Distance and geological data.
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Khoirunurrofik Local economic structure, productivity growth, and industry life cycle: evidence from Indonesia. Asia-Pac J Reg Sci 2, 453–475 (2018). https://doi.org/10.1007/s41685-018-0072-6
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DOI: https://doi.org/10.1007/s41685-018-0072-6