Working Paper: CEPR ID: DP6941
Authors: Marius Brlhart; Federica Sbergami
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 measures of urbanization 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. This implies that the tradeoff between national growth and inter-regional equality may gradually lose its relevance.
Keywords: Agglomeration; Dynamic Panel Estimation; Economic Growth; Urbanisation
JEL Codes: O4; R11; R12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| agglomeration (R11) | GDP growth (O49) |
| initial per capita GDP (P24) | agglomeration's effect on GDP growth (R11) |
| agglomeration (R11) | GDP growth at low levels of economic development (O55) |
| agglomeration (R11) | GDP growth at high levels of economic development (O49) |
| agglomeration (urbanization measures) (R11) | GDP growth (negative interaction with initial GDP per capita) (O49) |
| greater trade openness (F19) | growth-promoting effects of urbanization (R11) |
| greater trade openness (F19) | urban primacy effects on GDP growth (R11) |