IDEAS home Printed from https://ideas.repec.org/p/wiw/wiwrsa/ersa15p689.html
   My bibliography  Save this paper

Agglomeration externalities and urbanization in Ecuador

Author

Listed:
  • Grace Carolina Guevara Rosero
  • Stephane Riou
  • Corinne Autant-Bernard

Abstract

The spatial agglomeration of economic activities play a crucial role on productivity but the composition of such an agglomeration is what really matters. There exists an ongoing debate between the predominance of the effects of agglomeration from specialization and diversity. This paper aims to estimate the impact of the type of externalities on the local sectoral productivity in Ecuador, a country of Latin American region for which literature gives little attention. When measuring agglomeration economies, one concern is the endogeneity issue. In this purpose, the instrumental variables method is implemented. We provide estimations using GMM model and we instrument the endogenous variable with a menace index, long lagged population density and spatial lags. Last, we investigate the specific role of urbanization. The intuition is that a critical level of urbanization is required to produce positive externalities as it guarantees the existence of a minimum level of transport and telecommunication infrastructures, of banking and financial services or other specific services. It is also a manner to capture the great heterogeneity of Ecuadorian cantons in terms of urbanization. Our empirical work is mainly based on the Economic Census of Ecuador 2010 which accounts for information declared in 2009. By aggregating the firm data, we build a two-digits industry database at the cantonal level. Precisely, our estimations are based on 86 industries and 221 cantons. From a first polled estimation on 7988 canton and industry pairs, our results suggest the existence of strong positive externalities from diversity impacting on the local productivity of industries and a lower impact of specialization. We also find economies of density, measured by the density of firms at the canton and industry levels that positively influence the local productivity of industries. Competition of firms has a significant negative effect. Moreover, we conduct regressions by distinguishing the manufacturing from the service industry. The magnitude of the externalities from diversity is positive and significant in manufacturing but much higher in the service industry. Interestingly, our regressions exhibit the non-monotonous effect of urbanization on the various externalities that impact on the local productivity. Precisely, the positive externalities arising from diversity are growing with the level of urbanization of cantons. Last, economies of density occur until a urbanization rate of 61%. Above this threshold, the economies of density cease to be positive suggesting that they are overcompensated by congestion effects. However, the effects of diversity and competition does remain highly positive, we therefore do not consider that the threshold of 68% represents excessive agglomeration.

Suggested Citation

  • Grace Carolina Guevara Rosero & Stephane Riou & Corinne Autant-Bernard, 2015. "Agglomeration externalities and urbanization in Ecuador," ERSA conference papers ersa15p689, European Regional Science Association.
  • Handle: RePEc:wiw:wiwrsa:ersa15p689
    as

    Download full text from publisher

    File URL: https://www-sre.wu.ac.at/ersa/ersaconfs/ersa15/e150825aFinal00689.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Ciccone, Antonio, 2002. "Agglomeration effects in Europe," European Economic Review, Elsevier, vol. 46(2), pages 213-227, February.
    3. Jean Imbs & Romain Wacziarg, 2003. "Stages of Diversification," American Economic Review, American Economic Association, vol. 93(1), pages 63-86, March.
    4. Combes, Pierre-Philippe & Gobillon, Laurent, 2015. "The Empirics of Agglomeration Economies," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 247-348, Elsevier.
    5. Pierre-Philippe Combes & Sylvie Démurger & Shi Li, 2013. "Urbanisation and Migration Externalities in China," Working Papers 1303, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    6. Bertinelli, Luisito & Black, Duncan, 2004. "Urbanization and growth," Journal of Urban Economics, Elsevier, vol. 56(1), pages 80-96, July.
    7. Davis, James C. & Henderson, J. Vernon, 2003. "Evidence on the political economy of the urbanization process," Journal of Urban Economics, Elsevier, vol. 53(1), pages 98-125, January.
    8. Fajgelbaum, Pablo & Redding, Stephen, 2014. "External integration, structural transformation and economic development: evidence from Argentina," LSE Research Online Documents on Economics 60285, London School of Economics and Political Science, LSE Library.
    9. Martin, Philippe & Ottaviano, Gianmarco I P, 2001. "Growth and Agglomeration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 947-968, November.
    10. Pierre-Philippe Combes & Gilles Duranton & Laurent Gobillon & Sébastien Roux, 2010. "Estimating Agglomeration Economies with History, Geology, and Worker Effects," NBER Chapters, in: Agglomeration Economics, pages 15-66, National Bureau of Economic Research, Inc.
    11. Gilles Duranton, 2007. "From cities to productivity and growth in developing countries," Working Papers tecipa-306, University of Toronto, Department of Economics.
    12. Duranton, Gilles & Puga, Diego, 2004. "Micro-foundations of urban agglomeration economies," 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 48, pages 2063-2117, Elsevier.
    13. Andrews,Donald W. K. & Stock,James H. (ed.), 2005. "Identification and Inference for Econometric Models," Cambridge Books, Cambridge University Press, number 9780521844413, January.
    14. Pierre-Philippe Combes & Gilles Duranton & Laurent Gobillon, 2011. "The identification of agglomeration economies," Journal of Economic Geography, Oxford University Press, vol. 11(2), pages 253-266, March.
    15. Gilles Duranton & Diego Puga, 2001. "Nursery Cities: Urban Diversity, Process Innovation, and the Life Cycle of Products," American Economic Review, American Economic Association, vol. 91(5), pages 1454-1477, December.
    16. Ciccone, Antonio & Hall, Robert E, 1996. "Productivity and the Density of Economic Activity," American Economic Review, American Economic Association, vol. 86(1), pages 54-70, March.
    17. Mariana Pereira & Isidro Soloaga, 2012. "Determinantes del crecimiento regional por sector de la industria manufacturera en México, 1988-2008," Serie documentos de trabajo del Centro de Estudios Económicos 2012-05, El Colegio de México, Centro de Estudios Económicos.
    18. K. J. Arrow, 1971. "The Economic Implications of Learning by Doing," Palgrave Macmillan Books, in: F. H. Hahn (ed.), Readings in the Theory of Growth, chapter 11, pages 131-149, Palgrave Macmillan.
    19. Gilles Duranton & J. V. Henderson & William C. Strange (ed.), 2015. "Handbook of Regional and Urban Economics," Handbook of Regional and Urban Economics, Elsevier, edition 1, volume 5, number 5.
    20. Combes, Pierre-Philippe, 2000. "Economic Structure and Local Growth: France, 1984-1993," Journal of Urban Economics, Elsevier, vol. 47(3), pages 329-355, May.
    21. Redding, Stephen & Fajgelbaum, Pablo, 2014. "External Integration, Structural Transformation and Economic Development: Evidence from Argentina 1870-1914," CEPR Discussion Papers 10026, C.E.P.R. Discussion Papers.
    22. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    23. Hisamitsu Saito & Munisamy Gopinath, 2009. "Plants' self-selection, agglomeration economies and regional productivity in Chile," Journal of Economic Geography, Oxford University Press, vol. 9(4), pages 539-558, July.
    24. Da Silva Catela, Eva Yamila & Porcile, Gabriel & Gonçalves, Flávio, 2010. "Brazilian municipalities: agglomeration economies and development levels in 1997 and 2007," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yanxu Li & Zhenfa Xie & Bo Li & Muhammad Mohiuddin, 2022. "The Impacts of In Situ Urbanization on Housing, Mobility and Employment of Local Residents in China," Sustainability, MDPI, vol. 14(15), pages 1-21, July.
    2. Tania Paola Torres Gutierrez & Jessica Andrea Ordóñez, 2019. "Agglomeration economies and urban productivity," REGION, European Regional Science Association, vol. 6, pages 17-24.
    3. Rodrigo MENDIETA MUÑOZ & Nicola PONTAROLLO, 2018. "Territorial Growth in Ecuador: The Role of Economic Sectors," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 124-139, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Grace Carolina Guevara-Rosero & Stéphane Riou & Corinne Autant-Bernard, 2019. "Agglomeration externalities in Ecuador: do urbanization and tertiarization matter?," Regional Studies, Taylor & Francis Journals, vol. 53(5), pages 706-719, May.
    2. Combes, Pierre-Philippe & Gobillon, Laurent, 2015. "The Empirics of Agglomeration Economies," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 247-348, Elsevier.
    3. repec:hal:spmain:info:hdl:2441/1kv8mtgl748r0ahh12air9erdc is not listed on IDEAS
    4. Ehrl, Philipp & Monteiro Monasterio, Leonardo, 2016. "Historical trades, skills and agglomeration economies," MPRA Paper 69829, University Library of Munich, Germany.
    5. Duranton, Gilles & Puga, Diego, 2014. "The Growth of Cities," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 5, pages 781-853, Elsevier.
    6. Pierre-Philippe Combes & Gilles Duranton & Laurent Gobillon, 2012. "The Cost of Agglomeration: Land Prices in Cities," Sciences Po publications 9240, Sciences Po.
    7. repec:hal:spmain:info:hdl:2441/6bmhhi42888fj8hn1okddaqsab is not listed on IDEAS
    8. Grace Carolina Guevara Rosero, 2015. "Impact of agglomeration on the regional growth of Latin American countries," ERSA conference papers ersa15p675, European Regional Science Association.
    9. Hoang, Manh Cuong & Schiller, Daniel, 2023. "Which firms benefit the most from agglomeration? New evidence from an emerging country with consistent measure of productivity," Journal of Asian Economics, Elsevier, vol. 86(C).
    10. Niebuhr, Annekatrin, 2016. "Benefits of dense labour markets - Evidence from transitions to employment in Germany," VfS Annual Conference 2016 (Augsburg): Demographic Change 145715, Verein für Socialpolitik / German Economic Association.
    11. Giulio Cainelli & Andrea Fracasso & Giuseppe Vittucci Marzetti, 2015. "Spatial agglomeration and productivity in Italy: A panel smooth transition regression approach," Papers in Regional Science, Wiley Blackwell, vol. 94, pages 39-67, November.
    12. Wan Li & Bindong Sun & Tinglin Zhang, 2019. "Spatial structure and labour productivity: Evidence from prefectures in China," Urban Studies, Urban Studies Journal Limited, vol. 56(8), pages 1516-1532, June.
    13. repec:hal:spmain:info:hdl:2441/68snpauh718coq747l6ekv80cd is not listed on IDEAS
    14. Alessia Matano & Moisés Obaco & Vicente Royuela, 2020. "What drives the spatial wage premium in formal and informal labor markets? The case of Ecuador," Journal of Regional Science, Wiley Blackwell, vol. 60(4), pages 823-847, September.
    15. Alessia Matano & Moisés Obaco & Vicente Royuela, 2018. "“What drives the spatial wage premium for formal and informal workers? The case of Ecuador”," AQR Working Papers 201806, University of Barcelona, Regional Quantitative Analysis Group, revised Jun 2018.
    16. Carlos Carreira & Luís Lopes, 2018. "Regional knowledge spillovers: a firm-based analysis of non-linear effects," Regional Studies, Taylor & Francis Journals, vol. 52(7), pages 948-958, July.
    17. Ana Gouveia & Sílvia Santos & Marli Fernandes, 2017. "The empirics of agglomeration economies: the link with productivity," GEE Papers 0067, Gabinete de Estratégia e Estudos, Ministério da Economia, revised Feb 2017.
    18. Alessia Matano & Paolo Naticchioni, 2009. "Wage distribution and the spatial sorting of workers and firms," Working Papers - Dipartimento di Economia 8-DEISFOL, Dipartimento di Economia, Sapienza University of Rome, revised 2009.
    19. Carolina Guevara, 2016. "Growth agglomeration effects in spatially interdependent Latin American regions," Working Papers halshs-01281610, HAL.
    20. De la Roca, Jorge, 2017. "Selection in initial and return migration: Evidence from moves across Spanish cities," Journal of Urban Economics, Elsevier, vol. 100(C), pages 33-53.
    21. Gilles Duranton & Diego Puga, 2023. "Urban Growth and Its Aggregate Implications," Econometrica, Econometric Society, vol. 91(6), pages 2219-2259, November.
    22. Simon Alder & Lin Shao & Fabrizio Zilibotti, 2016. "Economic reforms and industrial policy in a panel of Chinese cities," Journal of Economic Growth, Springer, vol. 21(4), pages 305-349, December.
    23. Luigi Buzzacchi & Antonio De Marco & Marcello Pagnini, 2021. "Agglomeration and the Italian North-South divide," Questioni di Economia e Finanza (Occasional Papers) 637, Bank of Italy, Economic Research and International Relations Area.

    More about this item

    Keywords

    agglomeration externalities; urbanization; Latin America; industry studies;
    All these keywords.

    JEL classification:

    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
    • L80 - Industrial Organization - - Industry Studies: Services - - - General
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wiw:wiwrsa:ersa15p689. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Gunther Maier (email available below). General contact details of provider: http://www.ersa.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.