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Geographical Cluster and the Self-Selection Effect of the Firms: Comparative Analysis on Cluster of Upstream and Downstream Industries and the Specialized Cluster

【Authors】
LI Ruiqin, SUN Puyang
【WorkUnit】
LI Ruiqin (Central University of Finance and Economics, 100081)
SUN Puyang (Nankai University, 300071)
【Abstract】

This paper examines the self-selection effect in spatial selection by the heterogeneous firms, that is, whether the Chinese industrial firms with high productivity are inclined to select the core zone. We not only consider the traditional specialized cluster within the same industry, but also analyze the diversified cluster based on the upstream and downstream relationship. We also study the difference of the self-selection effect under these two kinds of clusters through empirical analysis based on the nested logit model. Our main conclusion is that more efficient firms are inclined to select the core zone of the specialized cluster, while the selfselection effect is weak when there is just the cluster of the upstream and downstream industries. Furthermore, we also find that processing trade firms pay more attention to the superior geographical position. Therefore, in the core areas with geographical advantages, the distribution of firm productivity is more dispersed, because the processing trade firms have low productivity. The self-selection effect is not obvious in processing trade firms. In light of this, while the core area is accelerating the transformation and upgrading of traditional industries, it is necessary to create favorable conditions for the location transfer of enterprises with low productivity. The periphery districts should attach importance to the openness, the infrastructure and the establishment of the upstream and downstream industrial chain in order to narrow the gap with the core zone.

JEL:L22, F14

【KeyWords】
Heterogeneous Firms, Self-Selection Effect, Specialized Cluster, Cluster of the Upstream and Downstream