Productivity and Agglomeration Economies in Chinese Cities

I test the existence of agglomeration economies in Chinese cities by evaluating the impact of population size and density on urban productivity. Based on panel data of about 150 Chinese cities during the 1990s, I find an inverted U-shaped relationship between city size and productivity as well as a positive effect of population density on urban productivity. The estimated city size corresponding to the peak point of labour productivity ranges between 3 and 4 million, which implies that most cities in our sample are not large enough to fully exploit productivity advantages associated with agglomeration economies. Comparative Economic Studies (2009) 51, 284–301. doi:10.1057/ces.2008.43; published online 21 May 2009