Agglomeration and total factor productivity of China’s textile industry

Abstract

Agglomeration is an important characteristic in China’s textile industry development. But regional textile industry isseriously unbalanced, only eastern location entropy (LQ) is greater than 1 and is the highest of all, followed by thecentral, western and north-eastern regions. Total factor productivity (TFP) is an important indicator to measure theeconomic growth efficiency. The average annual growth rate (AAGR) of eastern textile industry TFP is the least andcentral TFP growth rate is the fastest. In order to investigate the relationship between agglomeration and TFP of China’stextile industry, especially at region level, this paper applies panel model to study how agglomeration influences TFPduring 2005–2018. The results show that increasing agglomeration degree restrains the TFP growth of China’s textileindustry. The coefficients of LQ on textile industry in China and four regions are all negative. There exists crowded effectin eastern textile industry. It has not formed the significant agglomeration effect in western and north-eastern textileindustry for very low agglomeration degree. So it implies that eastern textile industry can accelerate the implementationof industrial transfer and structural adjustment to lower agglomeration and maintain sustained profitability of textileenterprises. Western textile industry can strengthen agglomeration by undertaking industrial transfer from eastern regionto form agglomeration effect to promote TFP growth.