Économie et Statistique n° 419-420 - Productivity, Institutions and Economic Policy

Economie et Statistique
Paru le : 27/08/2009
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Agglomeration Economies and Business Productivity: an Estimate on French Individual Data

Yoann Barbesol et Anthony Briant

The persistent spatial concentration of certain activity sectors is hard to explain without admitting the existence of agglomeration economies. Interest in the quantitative estimation of these gains has recently revived thanks to the increasing availability of detailed data at enterprise level. Using three administrative databases on French corporate accounts and employment, we assess the impact on these enterprises’ total factor productivity of urbanization externalities, i.e., those created from total size, accessibility, and industrial diversity of the location area, and localization externalities, which relate to the level of specialization of an activity area. Our study begins by emphasizing the importance of the former: we find a positive, significant impact of an area’s accessibility to the rest of the national market as well of the density of its economic fabric on average business productivity. In addition to these urbanization externalities, specialization has powerful local effects, suggesting the existence of localization externalities. In sum, firms are more productive, on average, in areas where their industry is relatively more concentrated. By contrast, we find that the diversity of local economic activities appears to have little influence on productivity. Similarly, the degree of local competition does not, on average, affect the productivity of firms in a cluster. A detailed study of the channels through which these externalities are produced, disseminated, and captured would certainly provide a useful extension to our research. We suggest an initial answer, but without being able to draw firm conclusions. We find that skilled agents appear to play a crucial role in the three processes (production, dissemination, and capture): when the quality of the workforce is taken into account, the most productive firms are indeed those that operate in an environment offering the highest-skilled local labour. This suggests that skilled employees are the mo

Economie et Statistique
No 419-420
Paru le : 27/08/2009