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Agglomeration and growth: Cross-country evidence

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Author Info
Brülhart, Marius
Sbergami, Federica

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Abstract

We investigate the impact of within-country spatial concentration of economic activity on country-level growth, using cross-section OLS and dynamic panel GMM estimation. Agglomeration is measured alternatively through urbanization shares and through indices of spatial concentration based on data for sub-national regions. Across estimation techniques, data sets and variable definitions, we find evidence that supports the "Williamson hypothesis": agglomeration boosts GDP growth only up to a certain level of economic development. The critical level is estimated at some USD 10,000, corresponding roughly to the current per-capita income level of Brazil or Bulgaria. Hence, the tradeoff between national growth and inter-regional equality may gradually lose its relevance. Our results also imply that, in terms of foregone growth, the cost of policies that inhibit economic agglomeration is highest in the poorest countries.

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File URL: http://www.sciencedirect.com/science/article/B6WMG-4T8SKX6-1/2/c8d7d575020bf9bf433f62d36a21519d
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Publisher Info
Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 65 (2009)
Issue (Month): 1 (January)
Pages: 48-63
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Handle: RePEc:eee:juecon:v:65:y:2009:i:1:p:48-63

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Web page: http://www.elsevier.com/locate/inca/622905

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Keywords: Economic growth Agglomeration Urbanization Dynamic panel estimation;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Brülhart, Marius & Mathys, Nicole A., 2008. "Sectoral agglomeration economies in a panel of European regions," Regional Science and Urban Economics, Elsevier, vol. 38(4), pages 348-362, July. [Downloadable!] (restricted)
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  2. Baldwin, Richard E. & Martin, Philippe, 2004. "Agglomeration and regional growth," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 60, pages 2671-2711 Elsevier. [Downloadable!] (restricted)
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  3. Duranton, Gilles, 2008. "From Cities to Productivity and Growth in Developing Countries," CEPR Discussion Papers 6634, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  4. Martin, Philippe, 1999. "Public policies, regional inequalities and growth," Journal of Public Economics, Elsevier, vol. 73(1), pages 85-105, July. [Downloadable!] (restricted)
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  5. Jonathan Temple, 1999. "The New Growth Evidence," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 112-156, March. [Downloadable!] (restricted)
  6. David Roodman, 2007. "A Note on the Theme of Too Many Instruments," Working Papers 125, Center for Global Development. [Downloadable!]
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  7. Easterly, William & Levine, Ross, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1203-50, November.
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  8. Duranton, Gilles & Overman, Henry G., 2002. "Testing for Localization Using Micro-Geographic Data," CEPR Discussion Papers 3379, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  9. Ades, Alberto F & Glaeser, Edward L, 1995. "Trade and Circuses: Explaining Urban Giants," The Quarterly Journal of Economics, MIT Press, vol. 110(1), pages 195-227, February. [Downloadable!] (restricted)
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  10. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July. [Downloadable!] (restricted)
  11. Bertinelli, Luisito & Black, Duncan, 2004. "Urbanization and growth," Journal of Urban Economics, Elsevier, vol. 56(1), pages 80-96, July. [Downloadable!] (restricted)
  12. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August. [Downloadable!] (restricted)
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  13. Maurice J.G. Bun & Frank Windmeijer, 2007. "The Weak Instrument Problem of the System GMM Estimator in Dynamic Panel Data Models," Bristol Economics Discussion Papers 07/595, Department of Economics, University of Bristol, UK. [Downloadable!]
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  14. Krugman, Paul & Elizondo, Raul Livas, 1996. "Trade policy and the Third World metropolis," Journal of Development Economics, Elsevier, vol. 49(1), pages 137-150, April. [Downloadable!] (restricted)
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  15. Dekle, Robert & Eaton, Jonathan, 1999. "Agglomeration and Land Rents: Evidence from the Prefectures," Journal of Urban Economics, Elsevier, vol. 46(2), pages 200-214, September. [Downloadable!] (restricted)
  16. Xavier Sala-I-Martin & Gernot Doppelhofer & Ronald I. Miller, 2004. "Determinants of Long-Term Growth: A Bayesian Averaging of Classical Estimates (BACE) Approach," American Economic Review, American Economic Association, vol. 94(4), pages 813-835, September. [Downloadable!]
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  17. J. Vernon Henderson, Zmarak Shalizi, and Anthony J. Venables, 2001. "Geography and development," Journal of Economic Geography, Oxford University Press, vol. 1(1), pages 81-105, January.
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  18. Rosenthal, Stuart S. & Strange, William C., 2001. "The Determinants of Agglomeration," Journal of Urban Economics, Elsevier, vol. 50(2), pages 191-229, September. [Downloadable!] (restricted)
  19. Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, vol. 126(1), pages 25-51, May. [Downloadable!] (restricted)
  20. Bowsher, Clive G., 2002. "On testing overidentifying restrictions in dynamic panel data models," Economics Letters, Elsevier, vol. 77(2), pages 211-220, October. [Downloadable!] (restricted)
  21. Martin, Philippe & I.P. Ottaviano, Gianmarco, 1999. "Growing locations: Industry location in a model of endogenous growth," European Economic Review, Elsevier, vol. 43(2), pages 281-302, February. [Downloadable!] (restricted)
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  22. Brulhart, Marius & Traeger, Rolf, 2005. "An account of geographic concentration patterns in Europe," Regional Science and Urban Economics, Elsevier, vol. 35(6), pages 597-624, November. [Downloadable!] (restricted)
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  23. Rosenthal, Stuart S. & Strange, William C., 2008. "The attenuation of human capital spillovers," Journal of Urban Economics, Elsevier, vol. 64(2), pages 373-389, September. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Steven Poelhekke & Frederick van der Ploeg, 2009. "Growth, Foreign Direct Investment and Urban Concentration: Unbundling Spatial Lags," DNB Working Papers 195, Netherlands Central Bank, Research Department. [Downloadable!]
    Other versions:
  2. Steven Brakman & Harry Garretsen & Charles van Marrewijk, 2009. "Economic Geography within and between European Nations: The Role of Market Potential and Density across Space and Time," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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