Industrial Agglomeration of Chinese Food Processing

Food processing has been widely recognized as a traditional, unskilled-labor intensive production. Yet rapid development in technology drives food processing into more sophisticated and technology-oriented industry. This paper utilizes a fixed effects model to test the hypothesis that the food processing industry is a high technology industry. The research employs a unique natural experiment where some provincial governments in China liberalized migration policies for highly educated/highly skilled (HEHS) workers. Theory holds that such labor liberalization policies will increase the level of industrial agglomeration by high technology firms facing a shortage of talent. The data are the 2001-2010 3-digit industrial and provincial level employment data from the China Labor Statistical Yearbook. This paper found strong evidence that the HEHS labor pool affected the location decision of food processing firms in China. The result supports recent literature that the food and agribusiness sector is increasingly dependent on knowledge workers and high technology. Other traditional determinants for industrial agglomeration; scale economies and proximity to markets are also found to promote industrial agglomeration in the food processing industry.