Agglomeration economies and the match between manufacturing industries and cities in China

Atheoretical framework of the match between industries and cities is first established based on agglomeration economies. Building on this framework, we use 3-digit manufacturing industries of 335 cities in China during 2003-2007 and establish a quantitative relationship between manufacturing and cities through analysing their threshold effects. We find that more innovative industries, with orders of rates of new products' value (RNPV) mean less than 30, share localization economies, while less innovative industries, with orders of RNPV mean more than 30, are not significantly subject to agglomeration economies. Cities with orders of size less than 30 do not share agglomeration economies significantly, those with orders of size between 30 and 230 are subject to urbanization economies, and those with orders of size more than 230 are subject to localization economies. We propose a path to match industries with cities: producer services should be developed in cities with orders of size less than 30; industries with orders of RNPV mean less than 30 are matched with cities with orders of size between 30 and 230; and other manufacturing is matched with cities with orders of size more than 230.