The effect of agglomeration on the productivity of urban manufacturing sectors in a leading emerging economy

- We examine the effect of agglomeration on urban labor productivity in the manufacturing sector.
- We analyze panel data of 200 Korean cities during the five-year period from 2004 to 2008.
- We find that urban labor productivity is determined by traditional inputs of agglomeration economies.
- We find that labor (output) density has a negative (positive) effect on urban labor (manufacturing) productivity.

This study investigates the effect of agglomeration on urban labor productivity in the manufacturing sector of Korea, a leading emerging economy. We expand upon the production density model of Ciccone and Hall (1996) by employing Ke's (2010) indicators, including variables for the labor density and manufacturing output density of the urban economy. To measure spatial spillover and labor pooling effects, we use the control variables of intra-city labor movement and the number of employees in each manufacturing sector who graduated from local higher educational institutions. The research is based on a panel data analysis of 200 Korean cities during the five-year period from 2004 to 2008. We find that urban labor productivity is determined by traditional inputs of agglomeration economies. While labor density has a negative effect on urban labor productivity, output density has a positive impact on urban manufacturing productivity.