Agglomeration Effects: Productivity of the Informal Sector in Vietnam

Abstract

This paper investigates agglomeration externalities on the productivity of informal household businesses in Vietnam. Although the paper finds heterogeneous impacts of agglomeration on the productivity of informal firms between urban and rural settings and across industries, it is found that technology transfers are not an agglomerative force for the informal sector of Vietnam. The disaggregation of local scale externalities into city types reveals that the highest developed cities in Vietnam may either be low-quality agglomeration or go beyond their optimal scale for the informal sector in some industries.