Industrial agglomeration and firm exports: Micro-evidence based on input-output linkages

Related research uncovers the effects of industrial agglomeration on firm exports through various channels. However, relatively little attention has been paid to the effects of vertical agglomeration. This paper investigates whether and how industrial agglomeration affects firm exports, based on input-output linkages. Using Chinese firm-level data from 2000 to 2011, we find that horizontal agglomeration increases firms' probability of exporting and sales by improving contract enforcement; upstream agglomeration increases firms' probability of exporting through intermediate inputs, while downstream agglomeration does the opposite through marketing channels. Moreover, compared to horizontal agglomeration only working on gross exports, vertical agglomer-ation has significant effects on the domestic content of export. We also find that the effect of industrial agglomeration on firm exports varies according to the firm ownership and its export status.