Do extensive producer services promote manufacturing agglomeration? Evidence from territorial servitisation in Northeast China

Abstract

We examine the effect of territorial servitisation on the spatial development of the manufacturing sector in Northeast China. Using data from 34 prefectural cities from 2003 to 2016, we find that the concentration of producer services promotes manufacturing agglomeration in the region. The novelty of our paper lies in the external instruments used to control for circular causation in the service-manufacturing nexus and spatial spill-overs of territorial servitisation during estimations. Our results are independent of a series of robustness tests and suggest that a synchronised development of the service and manufacturing sectors enables the region to fully internalise territorial servitisation.