International comparisons

A comparison of the degree of industrial agglomeration across countries is of most important on examining the previous work and looking for new findings. We aim to compare the pattern of industrial agglomeration with results of previous studies in developed countries. The big challenge of making international comparison based on EG or MS index is their different country and region size. The index value calculated at different region level can be very different (Ellison and Glaeser, 1997). The mechanism of the estimation of values is by using the share of employment within a geographic area and the share of employment within each industry. Firstly, the number of regions in the estimation is crucial to determine the values. In general, the larger the variation of the industry across different regions, the larger the geographic concentration value.

Likewise, the larger share variation we have across different regions, the larger the industrial concentration value we have. Moreover, the geographic area is also crucial when comparing the results across countries. Ellison and Glaeser (1997) calculated the EG index value at state level and classified a γ value greater than 0.05 as being a highly agglomerated industry; a γ value between 0.02 and 0.05 as a somewhat agglomerated industry; and a γ value less than 0.02 as a less agglomerated industry. This classification has been widely used on international comparisons. In concern of the similar administration region level in the US, France and the UK applied in estimating and comparing the degree of agglomeration, province region as the second administration region level is the best option for China to match the state level, department level and postcode area which are also the second largest administration region level in those countries. We also provide the distribution of MS index values at other region level in our selected years to study the changes on the degree of agglomeration in China in the past decade.

19 See table A.16. of high-tech industries in China in the appendix.

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6.1 The comparison at the 2-digit industry level

Table 1.12 summarises the previous analysis on the pattern of industrial agglomeration among the US, France and the UK. France has the highest percentage of highly agglomerated industry classifications with 27% of 4-digit industries being highly agglomerated; the US follows and the UK is the least. Our results give agglomeration results for China at the province level, the district/county level and the postcode level in 1998, 2002, 2003 and 2007.

[Table 1.12 about here]

In table 1.12, the percentage of 4-digit industries that falls into the very concentrated industry class goes up from 42% in 1998 to 51% in 2007 based on the province level results. The percentage of somewhat concentrated industries steadily increase from 16%

to 19% from 2003 to 2007. However, there is a slightly overall value downward trends from 2002 to 2003. It implies that industries have become more agglomerated in general while the trend in the percentage of somewhat agglomerated and not very agglomerated industries is mixed due to the alternation of 4-digit industry code after 2002. It is clear to find that the degree of agglomeration in China has experienced a stable increase at all region levels in the last decade.

Most importantly, the percentage of highly agglomerated industries is much higher than the US and other countries and its percentage has been increased steadily over the whole period. In general, the percentage of highly agglomerated industries and somewhat agglomerated industries rises continuously in China. Our comparisons aim to consider the results of industrial agglomeration across different countries based on a similar geographic area. Some 42%-51% of 4-digit industries defined as very concentrated in China were the largest share of the very concentrated classification among all countries.

If the US state is the closest geographic area in size to the province area in China, there are actually more very concentrated industries in China than in the US since 1998. The

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greater number of raw materials extraction industries in China than in the US can partially explain these results. Furthermore, the share of somewhat agglomerated industries in the US is higher than in China and the share of less agglomerated industries in the US is smaller than in China. It suggests that the value distribution in China is a

“dumbbell” pattern while it shows a “spindle” in the US. In general, the level of industrial agglomeration is obviously underestimated as China has more very concentrated industries than the US. The degree of agglomeration in China is also much larger than France and the UK.

6.2 Comparison among the top agglomerated industry

It is also important to study the pattern of industrial agglomeration by looking at the types of most agglomerated industries in different countries. The previous comparison show that the most agglomerated industries in France is close to the US that high-tech industries are found to be highly agglomerated. However, the pattern and degree of agglomeration in the UK is different and lower than two other countries. We introduce the results of China at province level into the comparisons in following tables.

[Table 1.13 about here]

In tables 1.13, we match the top agglomerated industries in 2002 and 2007 with the top agglomerated industries in the US, France and the UK. There are fewer 4-digit industries that can be matched in 2007 than in 2002. The MS index value for those top agglomerated industries in China is still higher than other countries. However, the products can be different according to different definition of 4-digit industry in each country. Knives and scissors (SIC-3484 or SIC-3424) is the only 4-digit industry can be matched with France and the UK in both years. In general, we find similarity on the type of most agglomerated industries in China and other countries. Traditional industries including textiles and cutlery together with some natural resource extractions are most likely to be matched. High-tech industries is still rare in the top agglomerated industry

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table at province level and therefore lead to difficulty to matched with highly agglomerated high-tech industries in the US and France.

Since the difference on the pattern of industrial agglomeration between China and other developed countries, we also attempt to match the top agglomerated industries in the US, France and the UK with similar industries in China. We apply the MS index value and the ranking of agglomeration to investigate the difference in table 1.14, 1.15 and 1.16²⁰. The last column also give the changed value and rankings of each industry between 2002 and 2007²¹. The negative value mean industry become less agglomerated while a positive changed ranking number represent industry become more agglomerated compare with other industries in China over time. In general, a positive changed value on MS index also matched with an increasing on rankings and vice versa.

Table 1.14 first show the matching between China and the US. The trends of degree of agglomeration for those matched Chinese industries is mixed. Seven industries with an increasing value and higher ranking on both value of MS index and ranking number. On the other hand, another seven industries show an downward trends on both degree of agglomeration and rankings. Leather Luggage, packages (bags) (SIC-1923) is the only industry having lower agglomeration degree but a higher ranking overall the industry. It might be explained as less 4-digit industry after 2002 in the dataset. Spacecraft (SIC-3762) has experienced a great increasing on the degree of agglomeration and ranking which is consistent with good performance of China space exploration progress since 2000. Its degree of agglomeration is also higher than the US.

[Table 1.14 about here]

[Table 1.15 about here]

20 The same comparisons made based on results in 2002 is also applied on table A.17, A.18 and A.19 in the appendix.

21 We use the average value of MS index and rankings to generate the changed values in the last column if one foreign industry matched with several industries in China.

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In table 1.15, matched industries between France and China are mostly increased.

Watches and timekeeping instrument (SIC-4130) and home audio equipment (SIC-4072) as high-tech industries are industries has very close agglomeration degree in China and France. Other textile industries and coal mining industries also have close MS index value in both countries' results.

[Table 1.16 about here]

In table 1.16, matched industries with similar degree of agglomeration in the UK and China mainly include ceramic, textile and leather industries, cutlery and hand tools. Some of the matched industries also have high rankings in overall degree of agglomeration in China. Therefore, the similarity of industrial agglomeration is only found on traditional industries that can be classified into several types while the degree of agglomeration in other aspect of comparisons show a big variation between China and other developed countries. Such as characteristics would be interesting for the future study on the determinants of industrial agglomeration across countries.