SPATIAL CONCENTRATION AND FIRM-LEVEL PRODUCTIVITY IN KAZAKHSTAN

Purpose of the research. This paper studies the effect of spatial agglomeration on firms’ total factor productivity in Kazakhstan using panel data from 2009 to 2017.Methodology. We employ a two-stage estimation strategy and control for endogeneity biases by making use of the GMM approach. The firm-level data is obtained from the Bureau of National Statistics of the Agency for Strategic Planning and Reforms of the Republic of Kazakhstan.Originality / value of the research. This study contributes to an empirical study of spatial concentration and firm-level productivity in developing countries and provides valuable insights for policymakers to consider before implementing government programs.Findings. The results suggest that productivity increases with clustering: a 10 % increase in the number of employees of the neighboring firms inside the same industry increases firm-level productivity by 1.36 %, while a 10 % increase in employment in other industries enhances firm performance by 1.95 %. The productivity gains are higher at the 2-digit regional level rather than at the 9-digit sub-regional level of geographical aggregation, implying that the denser geography increases firms’ performance.