AGGLOMERATION ECONOMIES IN THE FORMAL AND INFORMAL SECTORS: A BAYESIAN SPATIAL APPROACH

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AGGLOMERATION ECONOMIES IN THE FORMAL AND INFORMAL SECTORS: A BAYESIAN SPATIAL APPROACH

Abstract

This article examines whether localized clusters of similar industries produce agglomeration economies in the formal and informal sectors. We develop a Bayesian method to estimate a spatial autoregressive model with an endogenous independent variable. We use establishment-level census data that cover both formal registered and informal unregistered establishments in Cambodia. We find that the density of local employment has a significantly positive effect on productivity in the informal sector, but little effect in the formal sector. For manufacturing, a doubling of employment density increases productivity in the informal sector by 9% through local linkages and by 19% through spatial multiplier linkages, leading to a 28% increase in total. A spatial network magnifies the local impact of agglomeration economies in the informal sector.

Title Page———i

Certification——–ii

Dedication———iii

Acknowledgement——-iv

Abstract ———vi

Table of Content——–vii

 

Chapter One

1.0 Introduction ——-1

1.1 Statement of Problem——4

1.2 Purpose of the Study——5

1.3 Significance of Study——8

1.4 Limitation——–9

1.5 Scope of Study——-11

 

Chapter Two

2.0 Review of Related Literature —-12

2.6 Summary of Literature Review—- 19

 

Chapter Three

3.0 Research Methodology and Procedure—22

3.1 Population ——–22

3.2 Sample and Sampling Technique—-22

3.3 Validation of the Instrument —-23

3.4 Reliability of the Instrument —–23

3.5 Data Analysis——-23

 

Chapter Four

4.0 Presentation and Discussion of Result—24

4.1 Analysis and interpretation of Data—25

4.2 Discussion of Results——38

 

Chapter Five

5.0. Summary, Conclusion, and Recommendation  –40

5.1 Summary——–40

5.2 Conclusion——–41

5.3 Recommendation——42

References ———45

Appendix 1——–47

Appendix ———50

AGGLOMERATION ECONOMIES IN THE FORMAL AND INFORMAL SECTORS: A BAYESIAN SPATIAL APPROACH

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