Abstract: Based on urban economic theory, this paper tries to build a theoretical framework of producer services agglomeration and to conduct an empirical test by using panel data of 247 cities across the country. Theoretical analysis shows that the size of local market, the average size of industrial enterprises (demand factors) as well as transaction costs, the degree of specialization of producer services and the level of competition (supply factors) promote the agglomeration of producer services. Empirical test confirms that although producer services concentrate in the central cities which have a larger market size and better economic geographical location, the key factors in the agglomeration of producer services in different regions of our country are different: for the eastern city the key factor is the local market scale, while the key factor for central and western cities is transaction costs. The empirical results also show that large-scale industrial enterprises are tend to outsource services and there exists MAR spillover in producer services, so the specialization helps to improve the degree of concentration. To this end, this paper proposes policy recommendations to speed up the producer services agglomeration.
Keywords: Producer Services, Local Market Size, Transaction Costs, Spillover Effect
source:Finance & Trade Economics ,No8,2013