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Industrial Agglomeration and Difference of Regional Labor Productivity:Chinese Evidence with International Comparison

Fan Jianyong(Institute of World Economy,Fudan University)  
Based on the close relationship of industrial agglomeration,labor productivity and regional inequality,this paper holds that locally increasing returns is the source of industrial agglomeration,which improving regional labor productivity and deeply affecting regional inequality.Using data of 261 cities in 2004,I find that the estimated elasticity of(average)labor productivity with respect to employment density is about 8.8 percent in China,compared to 5 percent in the US and 4.5 percent in the EU.Further,I find that the difference of agglomeration effect among provinces exists two cases:no difference and significant difference.However,under the polarization of industrial location,both two cases enlarge the divergence of labor productivity among provinces,and keep the high level of regional inequality.
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