•   •

Firm productivity, wages, and agglomeration externalities Marcel Fafchamps, CSAE, Oxford University Said El Hamine, Ministry of Commerce & Industry WPS/2004-32 Download the Paper (PDF format) - October 3, 2004 Tell a colleague about it. Printing Tips: Select 'print as image' in the Acrobat print dialog if you have trouble printing. ABSTRACT: This paper investigates the existence of local externalities in manufacturing. In contrast to many other studies that focus on aggregate growth, we examine the effect of externalities on firm-level productivity and wages. Our empirical results show that agglomeration externalities occur through both productivity and wage effects.Returns to specialization are strong and large in magnitude. In accordance with the views of Marshall, Arrow and Romer, the net effect of competition on productivity and wages tends to be negative. Large firms facing no local competition have higher revenues and pay lower wages. Competition tends to lower wages, however, probably because of thick labor market externalities. We also find some limited evidence in favour of the diversity argumment put forth by Jacobs. SUGGESTED CITATION: Marcel Fafchamps and Said El Hamine, " Firm productivity, wages, and agglomeration externalities" (October 3, 2004). The Centre for the Study of African Economies Working Paper Series. Working Paper 232. http://www.bepress.com/csae/paper232