DP6941 Agglomeration and Growth: Cross-Country Evidence

Author(s): Marius Brülhart, Federica Sbergami
Publication Date: August 2008
Keyword(s): agglomeration, dynamic panel estimation, economic growth, urbanisation
JEL(s): O4, R11, R12
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=6941

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.