The Impact of Industrial Agglomeration on Firm Employment and Productivity in Guangdong Province, China

This paper examines the impact of industrial agglomeration on productivity and firm employment in Guangdong province, China. As the firstly opened area in China, Guangdong gained most benefits from the economic reform by attracting FDI and expanding trade. Furthermore, due to its adjacency to Hong Kong, a core-periphery mechanism with significant agglomeration effects, as described in spatial economics, had been observed. By carrying out OLS empirical method and using a panel dataset containing 504 samples from 2000 to 2005 at individual firm level, we found that the manufacturing rather than the service industry is playing the most important role in Guangdong; Furthermore, bridge infrastructure, industrial specialization, and FDI significantly affect firm employment and productivity. The empirical results imply that Guangdong should strengthen its technology level for further industrial upgrading.