Agglomeration Externalities in Ecuador. Do Urbanisation and Tertiarisation Matter?
GATE WP 1818, September 2018
29 Pages Posted: 16 Oct 2018
Date Written: September 12, 2018
The paper investigates whether the tertiarisation and the rapid urbanisation faced by developing countries favour agglomeration economies. Focusing on Ecuadorian cantons, a productivity equation is estimated using the GMM model with instruments controlling for endogeneity. The varying impact of industrial concentration, diversity, competition and density across industries is investigated and for the first time, the implication of the level of urbanisation on agglomeration externalities is studied. Stronger effects are found for services. The threshold of urbanisation at which diversity, density and competition agglomeration externalities all generate positive effects was 33% while they seem challenged by congestion in highly urbanised cantons.
Keywords: agglomeration externalities, productivity, urbanisation, tertiarisation, Latin America
JEL Classification: O54, L80, O18, L60
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