Explaining local manufacturing growth in Chile: the advantages of sectoral diversity

Rita Almeida () and Ana Fernandes ()

Applied Economics, 2013, vol. 45, issue 16, 2201-2213

Abstract: This article investigates whether the agglomeration of economic activity in regional clusters affects long-run manufacturing Total Factor Productivity (TFP) growth in an emerging market context. We explore a large firm-level panel dataset for Chile during a period characterized by high growth rates and rising regional income inequality (1992--2004). Our findings are clear-cut. Locations with greater concentration of a particular sector have not experienced faster TFP growth during this period. Rather, local sector diversity was associated with higher long-run TFP growth. However, there is no evidence that the diversity effect was driven by the local interaction with a set of suppliers and/or clients. We interpret this as evidence that agglomeration economies are driven by other factors such as the sharing of access to specialized inputs not provided solely by a single sector, e.g. skills or financing.

Date: 2013
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DOI: 10.1080/00036846.2012.659344

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