Spatial Concentration and Firm-Level Productivity in France

This paper analyzes empirically the effect of spatial agglomeration of activities on the productivity of firms using French individual firm data from 1996 to 2004. This allows us to control for endogeneity biases that the estimation of agglomeration economies typically encounters. French firms benefit from localization economies, but not from urbanization economies nor from competition effects. The benefits generated by increased sectoral clustering, though positive and highly significant are modest and geographically very limited. The gains from clusters are also quite well internalized by firms in their location choice: we find very little difference between the geography that would maximize productivity gains and the geography actually observed.