As the first study for Korea, we estimate the effects of urbanisation and localisation economies on the productivity of 19 Korean manufacturing industries in 1983, 1988 and 1993. Based on the observation that material inputs contributed about 60 per cent of productivity growth in Korea, we consider gross output productivity, which is an innovation that distinguishes our study from previous ones. We find that localisation economies have been dominant features of Korean manufacturing industries, whereas Korean manufacturing industries did not benefit much from locating in large cities. More interestingly, there are some indications of quadratic relations between city size and urbanisation economies.
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