Sectoral manufacturing productivity growth in Korean regions

The growth of an industry in a city has been explained by dynamic externality theories such as those by Marshall, Arrow and Romer, Porter, Jacobs and Storper. Each of these views describes a different mechanism by which the initial conditions for a particular industry in a city facilitate knowledge spillover extensive enough to promote productivity growth. This paper develops a model that distinguishes among these and applies it to Korean manufacturing industries. The empirical analysis concludes that productivity growth in Korea is more rapid when small firms from different industries compete, supporting theories by Jacobs and Storper. However, the impacts of specialisation and diversification vary substantially across major manufacturing industry sub-categories. Land use regulations such as greenbelt rates and excessive concentration control districts generally show significant negative effects on productivity growth.