Emerging Geography of Creativity and Labor Productivity Effects in China

• DOI: http://doi.org/10.1111/j.1749-124X.2013.12040.x
• Author: Wentao Yu,Jin Hong,Yanrui Wu,Dingtao Zhao
• Published date: 01 September 2013
• Date: 01 September 2013

78 China & World Economy / 78–99, Vol. 21, No. 5, 2013

©2013 Institute of World Economics and Politics, Chinese Academy of Social Sciences

Emerging Geography of Creativity and Labor

Productivity Effects in China

Wentao Yu, Jin Hong, Yanrui Wu, Dingtao Zhao*

Abstract

The paper presents an alternative approach to explain why regional productivity is different

across regions by utilizing the creative class approach in China. First, we analyze the extent

of spatial agglomeration of the creative class across regions in China. Second, we develop

a model with spatial externalities to investigate how the concentration of the creative class

can promote regional productivity. Our analysis confirms the importance of spatial

agglomeration of the creative class in stimulating regional productivity. The results also

imply that regional productivity is greater in markets with higher levels of innovation,

capital stock, manufacturing and urbanization. In light of the results of our analysis, we

discuss a number of policy implications.

Key words: China, creative class agglomeration, creativity, regional labor productivity,

spatial externality

JEL codes: C23, J24, R11, R12

I. Introduction

In the knowledge economy, innovation has become an increasingly important driving force

for regional growth. Variations in the degree of participation of developed and developing

countries or regions in producing national innovation have resulted in some countries or

regions experiencing rapid growth while others are left behind. Possible causes of this

phenomenon include agglomeration economies and path dependency. This particular cause–

*Wentao Yu, PhD candidate, School of Management, University of Science and Technology of China, Hefei,

China. Email: zeroyu@mail.ustc.edu.cn; Jin Hong (corresponding author), Associate Professor, School of

Management, University of Science and Technology of China, Hefei, China. Email: hongjin@ustc.edu.cn;

Yanrui Wu, Professor, Business School, University of Western Australia, Perth, Australia. Email:

yanrui.wu@uwa.edu.au; Dintao Zhao, Professor, School of Management, University of Science and

Technology of China, Hefei, China. Email: box@ustc.edu.cn. We are grateful to the referees for their

constructive comments. We also appreciate the support of the National Natural Science Foundation of

China (71172213 and 71171183), the Ministry of Education, Humanities and Social Sciences Project

(09YJA630153 and 10YJA790260) and the National Social Science Foundation of China (08&ZD043).

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Emerging Geography of Creativity and Labor Productivity Effects in China

©2013 Institute of World Economics and Politics, Chinese Academy of Social Sciences

effect linkage has been examined in numerous studies (Krugman, 1991; Glaeser et al., 2001;

Zhao and Zhang, 2010; Chen and Wu, 2012).

Generally, the growth effect of production factor agglomeration can be realized through

localization externalities (Marshall, 1890), pecuniary externalities (Krugman, 1991) and

competitive advantage of clusters (Porter, 1998). It has become popular to attribute regional

growth to the ability to attract the “creative class” (Florida, 2002a). There are many examples

of creative communities, such as Hollywood, Silicon Valley, and the design and advertising

cluster of London. The empirical literature on the creative class or entrepreneurial individuals

is generally supportive of the notion that such agglomerations of talent have a positive

effect on productivity and employment growth; the combination of these production factors

will ultimately contribute to economic growth (Glaeser et al., 2001; Yusuf and Nabeshima,

2005; Florida et al., 2008; Fan et al., 2012).

However, the published studies on creative clusters are mainly based on advanced

economies. China, as the largest developing country in the world, has undergone tremendous

social and economic change since the introduction of economic reform policies in 1978. It

is argued that China’s economic development is mainly dependent on the huge international

market and low costs, especially in manufacturing. However, commentators have noted

that China’s rapid growth is also driven by the rise in talent (Qian, 2010; Hong and Yu,

2012), and, in particular, its already large but growing number of scientists and engineers.

Once creative employees are highly concentrated in a region, it becomes a creative area,

facilitating cooperation and communication among talents, which results in new knowledge

generation and associated reductions in cost.

Concentration of the creative class is purported to increase productivity, and to have

benefits for both firms/households and production/consumption. The differences in

economic agglomerations might underlie variations in productivity improvement and

regional growth (Krugman, 1991; Takatoshi and Thisse, 2006). In China, there are significant

differences in the creative clusters (including size, extent and number of creative clusters)

across regions. The creative clusters in the coastal provinces are expanding rapidly (e.g.

Beijing 798 Art Zone and Shanghai Zhangjiang Hi-Tech Park), while in the interior provinces,

the ability to attract high quality human capital is limited.

In this paper, we shed light on the following two research questions. First, how big are

the differences between the creative class agglomerations (CCA) in the coastal provinces

and the interior provinces in China? Second, how does the variation in CCA affect regional

labor productivity (RLP)? The responses to these two questions have implications for

understanding the transformation of China’s economic growth from being efficiency-driven

to innovation-driven.