Patterns of industrial agglomeration

In order to introduce the pattern of industrial agglomeration at a more detailed industry and region level, we now use the un-weighted mean value of the MS index to study industrial agglomeration at the 2-digit industry level. Tables 1.7 exhibit the pattern of industrial agglomeration at the 2-digit industry level in 2007, calculated using an un-weighted 4-digit industry mean value of the MS index. In column 2, we aggregate the value at the 4-digit industry level to un-weighted mean values at the 2-digit industry level. We follow the example of Devereux et al. (2004) and Maurel and Se'dillot (1999) and classify the 4-digit values into quartiles (the last quarter on the right representing the most agglomerated industries). The share of each class reflects the degree of agglomeration of each 2-digit industry. The MS index is represented by the value of here. We calculate the MS index at the 4-digit industry level and county level.

In 2007, it is clear to find that natural resources extractions and labour intensive industries are most agglomerated while energy, some high-tech industries, and raw material oriented industries are least agglomerated¹²¹³. At least 40% of the 4-digit industries belong to the top four most agglomerated 2-digit industries have value between 0.019 and 0.478. On the other hand, energy supply and water supply industries with over 80% of the 4-digit industries within the least agglomerated 4-digit industries have value smaller than 0.003.

[Table 1.7 about here]

12 See table A.4, A.5 and A.6 for the un-weighted 2-digit industrial agglomeration patterns in 1998, 2002 and 2003.

13 We treat Communications equipment, computers and other electronic equipment (SIC-41) here as the assembling of high-tech products and therefore as labour-intensive industries in China.

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Figures 1.6, 1.7 and 1.8 show the overall pattern of industrial agglomeration at the 4-digit industry and county level in 2007¹⁴. The agglomeration measures are highly skewed. The degree of geographic concentration is much higher than industrial concentration support the idea that industrial agglomeration is driven by geographic concentration in China.

[Figure 1.6 about here]

[Figure 1.7 about here]

[Figure 1.8 about here]

In tables 1.8, we show the top twenty most agglomerated industries at the 4-digit industry level. We match the 4-digit industries' name and code with industries before the restructuring of SIC in 2002 in column 2 for 2007 results. The star sign behind some 4-digit industry represent that industry has also been included in the top twenty most agglomerated industries table in 1998 or 2003¹⁵. We first study the pattern of the most agglomerated industries. Then, the changes and trends of the most agglomerated industries from 1998 to 2007 are also discussed.

[Table 1.8 about here]

In 2007, Small electricity appliances, small tools making and textile industries which are export-oriented and labour-intensive industries in China are included in the top agglomerated industry table. Some other natural resource related industries are also found in the table. The reason of these high agglomeration level is due to their much higher geographic concentration value compared with their industrial concentration value.

14 See figure A.3 to figure A.11 for the value distributions of agglomeration in 1998, 2002 and 2003 in the appendix.

15 See table A.7, A.8 and A.9 in the appendix for the top twenty most agglomerated industries in 1998, 2002 and 2003.

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There two silk-related industries are positioned 6th and 14th in the table. and the number of firms for these two industries is much larger than for those other industries. In general, the motivations of agglomeration given by Marshall is partially proved in the China case.

In figure 1.9 we give the Gamma value of top most agglomerated industries in four selected years. We can see industries' degree of agglomeration in 2007 is larger than in previous years between value 0 to 0.2. However, the values in 1998 is significantly greater than in 2007 after that suggesting more extreme values on the top agglomerated industry estimation in 1998 than in 2007. Consider the large amount of natural resource extractions industries and natural advantage based industries in the top agglomerated industry table, those extreme values come from those industries and leads to big difference between the result of two years.

[Table 1.9 about here]

[Figure 1.9 about here]

Table 1.9 and figure 1.9 further provide a comparison between the top twenty most agglomerated industries across the time. We track the value changes of those key indicators for those top twenty agglomerated industries in the selected years. There is a big change on the top agglomerated industry table from 1998 to 2007 although the top five agglomerated industries in 2007 remains to be the top agglomerated industries since 2003. Only two industries are found to be still highly agglomerated from 1998 to 2007. It also implies the pattern of industrial agglomeration become relatively stable in the second five years.

In general, the top twenty most agglomerated industries in 2007 has more number of firms than matched industries in previous years. However, their trends of industrial agglomeration is quite mixed while industries with a higher geographic concentration

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would also have a higher industrial agglomeration extent (SIC-3424 and SIC-1743). On the other hand, a quicker decrease on industrial concentration than on geographic concentration may have mixed impact on industrial agglomeration (SIC-2623 and SIC-3316). In combination of findings from table 1.8, the top twenty agglomerated industries mostly come from those 2-digit industries also highly agglomerated except Potassium fertilizer (SIC-2623) in 2007.