Agglomeration Economy and Input-output Linkage: Evidence from the Entry of the Agro-food Industry in China

Abstract

The agro-food industry in China has experienced continuous growth during the last two decades. With booming domestic demand and increasing international trade, numerous firms are expected to be established in the near future. By spatial econometrics model, this research investigates the effect of agglomeration economy and input-output linkage on the setting up of agro-food firms in China. Results suggest that agglomeration economy and input-output linkage strongly predict the entry of firms into the agro-food market. Our finding provides potential insights for the development of rural areas as well as for the location choice of food firms.