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Volodymyr Vakhitov Saint Petersburg October 11, 2012

Are There Urbanization Economies in a Post-Socialist City? Evidence from Ukrainian Firm-Level Data. Volodymyr Vakhitov Saint Petersburg October 11, 2012. Outline. Motivation Data description Model and Estimation Issues Preliminary results. Agglomeration in the Nutshell.

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Volodymyr Vakhitov Saint Petersburg October 11, 2012

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  1. Are There Urbanization Economies in a Post-Socialist City? Evidence from Ukrainian Firm-Level Data Volodymyr Vakhitov Saint Petersburg October 11, 2012

  2. Outline • Motivation • Data description • Model and Estimation Issues • Preliminary results

  3. Agglomeration in the Nutshell Common labor pool? Relationships between managers and/or owners? ? Common market?

  4. Motivation: Objective • Agglomeration economies: • External (to the firm) economies ofscale • Localization: • Internal to the industry • Internal to the location • Urbanization: • External to the industry • Internal to the location

  5. Motivation: Urbanization Economies • Urbanization economies: • external to the firm and the industry as a whole, internal to the location • Jacobs (1969): spillovers matter! • Innovations • Knowledge sharing • Borrowing and developing new product • [Schumpeterian] churning

  6. Motivation: Important Issues • How to measure (Research Policy, 2009)? • Size (employment, # of plants) • Diversity (similarity and concentration indices) • Are measures comparable (robustness)? • Cluster boundaries (aggregation): • What is “the same location”? • What is “the same industry”?

  7. Motivation: Post-Socialist City • Land “price” and previous allocation • “Lock-in effect” within city boundaries • Ownership issues • Outdated capital stock

  8. Outline • Motivation • Data description • Model and Estimation Issues • Preliminary results

  9. Data Description Registry: • “Official” data (National Statistics Office) • Panel (2001-2007), submitted by firms • Firm level (plant level on the way) • Excludes budgetary sector and banks

  10. Data Description Ownership: • “Official” data (State Property Fund and FDI statements) • Panel (2001-2005), collected by SPF • Firm level only

  11. Data: Sample Composition

  12. Data Description: Raw Variables • Territory and industry codes • Output, employment, capital, materials • Ownership (private: domestic / foreign) • Output assortment • Innovation activity • FDI • Purchases from other sectors • Exports and imports

  13. Data Description: Constructed Variables • Size: • Other employment in the city • ln(empl) = ln(# firm) + ln(empl/# firms) (Henderson, 2003) • Diversity: • Market: employment or firm count based HHI • Internal: output composition HHI • Share of imports in the inputs • Use of products from other sectors produced in the same city (!!!)

  14. Outline • Motivation • Data description • Model and Estimation Issues • Preliminary results

  15. Model • TFP Model (Rosenthal and Strange, 2004): • Econometric Specification (Henderson, 2003):

  16. Estimation issues • One-stage and two-stage estimation • Restricted to manufacturing in cities • Area and industry-year fixed effects • Robust estimation • 2-stage: TFP by Olley-Pakes, then regress on agglomeration variables + controls

  17. Outline • Motivation • Data description • Model and Estimation Issues • Preliminary results

  18. Production Function Results

  19. Basic specification (XT-FE)

  20. Olley-Pakes Two Stage (TFP)

  21. “Urban depreciation” • Ratio: • Current value of all fixed assets in the city to • Historical value of all fixed assets in the city • Predicted effect: the higher, the better

  22. “Urban depreciation”

  23. Ownership variables • PO: privately owned • DO: private, majority domestic • FO: private, majority state • PO = FO + DO

  24. Ownership variables

  25. Ownership results

  26. Conclusions and implications • Urbanization economies seem to be present • More pronounced for firm counts based measures, than labor based • Urban capital depreciation matters • Ownership effect: foreign – private domestic – state.

  27. Volodymyr Vakhitov Kyiv School of Economics : vakhitov@kse.org.ua

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