Prema-chandra Athukorala: This paper examines the impact of locational proximity on productivity of firms in Korean manufacturing using a plant-level panel dataset covering the period 1991–99. Locational proximity can affect the productivity of a given firm (plant, in this case) through access to specialized labor, specialized intermediate goods, and knowledge (technical and managerial know-how) from the other firms in the given locality. The sole focus of this paper is on the impact operating through the third (knowledge) channel. The dependent variable of the analysis is plant level total factor productivity (TFP). The locality effect is represented in the estimation equation by the medium TFP level of the firms in the given industry within each locality. For the purpose of estimating the proximity impact on productivity, plants are grouped into 16 localities: seven major cities and nine provinces.
The discussion on the database in the paper is rather sketchy. In an...