Estimate the City Size Threshold of Industrial Agglomeration Model: Evidence From Chinese Prefecture Level Cities

Abstract

Based on the externality theory, this paper estimates the city size threshold of specialized agglomeration and diversified agglomeration. We find that when the urban population is below 1.25 million, specialized agglomeration is more advantageous for improving urban labor productivity. When the urban population exceeds 0.9 million, diversified agglomeration is more advantageous for improving urban labor productivity. Moreover, Specialized agglomeration of small and medium-sized cities is more likely to play the role of Marshall-Arrow-Romer externality within the spillover radius of regional central cities. One important policy suggestion is that for areas with small administrative regions and small population, it is better to increase the level of specialized agglomeration through industrial transfer, and for areas with large administrative regions and large population, it is better to increase the level of diversified agglomeration through industrial introduction, so as to further improve the urban economic efficiency.