Author

• zahra dehghan shabani

Assistant Professor, Economics Department, Shiraz University

Abstract

This study investigates the effect of density of economic activity, defined as  the intensity of labor and physical capital per square kilometer, on labor productivity in the Iranian provinces. . The density of economic activity has positive effects on labor productivity in several channels such as increasing returns to scale, knowledge spillover, and specialization. Also, the density of economic activity has negative effects on labor productivity because of  congestion and pollution.
The empirical results show that a higher density of economic activity has led  to an increasing labor productivity in 28 provinces of Iran over the period 2001-2011. We find that  doubling  the density of economic activity on average increases  labor productivity by around 63 percent.
 

Keywords

• Density of Economic Activity
• Labor Productivity
• panel-data
• Driscoll-Kraay standard errors