City Size, Population Concentration and Productivity: Evidence from China

This paper investigates the impact of China's city size and urban population concentration on city productivity by developing a distinctive index based on global nighttime light data. Using the panel data of 280 prefecture cities from 2004 to 2013 and employing dynamic system generalized method of moments and panel threshold model regression techniques, our results show that city size has a positive impact on city productivity; therefore, cities in China still have the potential to expand. While moderate urban population concentration can benefit city productivity, excessively concentrated urban population distribution may impede the growth of city productivity. We also find that the level of labor income significantly affects the impacts of urban agglomeration on labor productivity. Therefore, our results imply that city development policies should focus more on how to appropriately allocate economic activities and adjust population distribution in urban areas according to different stages of economic development.