Effects of agglomeration externalities on total factor productivity: Evidence from China's textile industry

Abstract

The paper analyzes the linearity in the impact of agglomeration externalities of MAR, Jacobs, and Porter on total factor productivity (TFP) and its decompositions of the textile industry in China by using panel data of textile enterprises in 29 provinces from 2003 to 2014. System-GMM is utilized for estimation. Results show that MAR externalities enhance technical efficiency through pulling up pure technical efficiency and accelerate the progress of technology. Jacobs externalities increase scale efficiency and technical progress but decrease pure technical efficiency. Porter externalities lower pure and scale efficiency, hence imposing a negative effect on both technical efficiency and technical progress.