The Localization of Select Asian Economies in the Age of Globalization: An Agglomeration Study

Abstract

The world is highly interconnected, and the strength of linkages indicates an economy’s ability
to benefit from participation in global value chains. We utilize the concept of agglomeration to
measure domestic linkages in a regional context. Using the Asian Development Bank’s
multiregional input–output tables and agglomeration methodology, this paper applies a select
group of economies’ backward and forward agglomeration indices from 2007 to 2015 and from
2015 to 2022 to gauge the degree to which value added is sourced from and absorbed by
domestic sectors, respectively, from a regional perspective. The results reveal that select Asian
economies such as Bangladesh, Fiji, Hong Kong, China, Indonesia, Kazakhstan, Lao PDR,
Malaysia, the Republic of Korea, Singapore, and Taiwan have increased their backward
agglomeration from 2015 to 2022. This suggests that the low-tech manufacturing sectors in
these economies are intensifying their use of domestic inputs. Additionally, there are more
Asian economies with increasing forward agglomeration indices. The rise in forward
agglomeration indicates that the domestic low-tech manufacturing sectors in these economies
are consuming more of their own final goods.