Industrial Agglomeration and Development: A Survey of Spatial Economic Issues in East Asia and a Statistical Analysis of Chinese Regions

In this article, we explore the issue of industrial agglomeration and its relationship to economic development and growth in the less-developed countries of East Asia. We present theoretical arguments and secondary empirical evidence as to why we should have strong expectations about finding a positive relationship between agglomeration and economic performance. We also review evidence from the literature on the roles of formal and informal institutions in East Asian regional economic systems. We then focus specifically on the case of China. We argue that regional development in China has much in common with regional development in other East Asian economies, although there are also important contrasts because of China’s history of socialism and its recent trend toward economic liberalization. Through a variety of statistical investigations, we substantiate (in part) the expected positive relationship between agglomeration and economic performance in China. We show that many kinds of manufacturing sectors are characterized by a strong positive relationship between spatial agglomeration and productivity. This phenomenon is especially marked in sectors and regions where liberalization has proceeded rapidly. We consider the relevance of our comments about industrial clustering and economic performance for policy formulation in China and the less-developed countries of East Asia.