Author: Changuk Byeon(Korea Institute for Industrial Economics & Trade)

Abstract

This paper empirically analyzes the impacts of source variables of agglomeration economies on coagglomeration patterns among industries. For the sources of agglomeration economies, the analysis indicates the following results. First, labor pooling induces the coagglomeration of the manufacturing and service industries regardless of the geographic range considered, and the degree of influence increases as regional scope expands. Input sharing positively influences the coagglomeration of relatively larger areas significantly in the manufacturing industry, while inducing the one of a smaller area in the service industry. Knowledge spill-over has an significant impact on the service industry’s coagglomeration over a larger scope. The positive impact of natural advantage is limited to the manufacturing industry. Second, the development of information technology strengthens the need for face-to-face interactions and affects the agglomeration within more adjacent scope in the manufacturing industry. On the contrary, there is an impact on the coagglomeration in the service industry over a larger scope as the need for face-to-face interactions reduces. Transportation costs induce the agglomeration of the manufacturing industry and between the manufacturing and service industries in a wider range of geographic scopes.

This analysis suggests that the sources of agglomeration should be identified to examine its working spatial scope in each source in the planning step for industrial agglomeration policy. Especially, it proposes that obtaining proper workforce is important for the vitalization of regional economies through the formation of industrial clusters.