The link between productivity and agglomeration is important to answer the question Do firms benefit from agglomeration? This study aims to investigate such link using proper proxies and econometric methods. This study employs the Ellison and Glaeser index and Total Factor Productivity to represent agglomeration economies and productivity levels in Turkish manufacturing industries, using 1980-2001 panel data. TFP is measured using SFA and then regressed along agglomeration and other control variables using a dynamic system GMM estimation method. This estimation method allows to account for the dynamic nature of TFP and also the possible endogeneitiy between productivity and agglomeration. The results indicate that Turkish manufacturing industries stand as an example to negative externalities.
Key words: Regional Economics, Agglomeration, Productivity, Turkish manufacturing industry, GMM. JEL classifications: R12, D24, C23. Article Language: EnglishTurkish
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