Synergy and Co-agglomeration of Producer Services and Manufacturing: A Panel Data Analysis of Chinese Cities

Ke S., He M. and Yuan C. Synergy and co-agglomeration of producer services and manufacturing: a panel data analysis of Chinese cities, Regional Studies. This paper constructs a simultaneous equation model of co-agglomeration of producer services and manufacturing that highlights the synergy effects of the two sectors located in the same cities or neighbouring cities. It applies the fixed effects instrumental variable (FE IV) estimator to a panel dataset of 286 Chinese cities for the years 2003–2008. The FE IV spatial econometric estimates indicate that manufacturing industry tends to locate in the cities where producer services are located, and vice versa; a city's manufacturing (producer services) might relocate if producer services (manufacturing) agglomerated in the neighbouring cities; and agglomeration of each industry has spillover effects within its own industry across neighbouring cities.