Abstract
This paper examines the agglomeration effects and urban amenity on labor productivity in LDC country which take Lao PDR as the case study. The study on agglomeration and urban amenity on productivity has been gained attention from academics and policy makers. However, there are few studies that analyze this issue in LDC country. On the other hand, many previous studies that examined the impact of agglomeration and urban amenity on productivity are inconclusive, and most studies focused only in developed and developing countries. The reasons of these indefinable conclusions partly come from the characteristics of countries and the firms. Therefore, our study therefore examines the impact of agglomeration and urban amenity on the productivity in the case of Laos in order to mitigate the weakness of previous studies. The multiple-regression model is applied in this study, with a sample size of 122,776 firms. This study finds that the agglomeration economies have a positive impact and statistically significant on labor productivity for all firms and small firms, while there are no significant net benefits agglomeration economies for medium and large firms. The urban amenity also has a positive effect and statistically significant on labor productivity for the firms across-country, except large firms. Therefore, the authors conclude that agglomeration and urban amenity are very important factors to improve the labor productivity of the firms in Lao PDR, especially for small enterprises. Based on our results, this study suggests that policy makers or private sector should invest more on improving urban amenity through improving facilities to facilitate business operations of enterprises for increasing labor productivity and enhancing the ability to compete in international market level for the long term.