The objective of this investigation is to study the role of agglomeration economies (manufacturing) in urban employment growth, as a proxy for economic growth, between 1980 and 2010 in Ecuador. The three measures of agglomeration-specialization, diversity, and density-are tested to determine their effect on employment growth in industries. The empirical analysis is based on firm- and city-level data from manufacturing activities. A model is proposed to estimate the effect of agglomeration economies on the growth of employment and a regression is conducted using instrumental variables. In particular, the two-stage least squares (2SLS) estimator is used. We conclude that localization economies measured by a specialization index have a positive impact on the growth of employment in the period analyzed. The results are similar to those obtained by other work carried out both in developed and developing countries.

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This investigation seeks to explore the importance of agglomeration mechanisms in the location decisions of new manufacturing firms in Ecuador, based on sector and canton level data for the 2000–2010 period. A model is proposed to explore the relative importance of agglomeration mechanisms in location decisions of new manufacturing companies, a regression is performed using instrumental variables, the econometric estimation is developed, and an identification strategy is proposed. The results of the empirical analysis show that the learning mechanism, and history, have a positive and significant impact on the creation of new firms. An increase of 1% in the transfer of knowledge in the industries and cantons of the country is correlated with the increase in the location of new firms in the order of 9.2%. In turn, history has a positive and significant effect on the creation of new firms, in industries and cantons characterized by a past industrial environment. Even when the learning mechanism and history are controlled by provinces, sectors, and cantons, they continue to be the most important determinants of the location of new firms. This evidence could be attributed to the public investment in Ecuadorian industry in recent years. In this sense, the contribution of this work is found in the empirical distinction of the mechanism that favors or inhibits the location decisions of new companies. The analysis was replicated for a three-digit sectorial disaggregation level, to verify whether the agglomeration mechanisms operate differently on a different industrial scale. The results suggested that there were no differences to be considered. When the analysis was done excluding the cantons of Quito, Guayaquil, and Cuenca, given their high representation in terms of the birth of industries and employment, the results were consistent with those previously mentioned. However, it is so only with respect to history, which in this case accounts for 38.8% of the birth of firms; whereas, matching accounts for an order of 38.9% in the period of analysis. This result is explained in the context of the country’s industrial policy.

In the literature on growth, infrastructure, in addition to other factors, is identified as a determining element in the growth of regions from a long-term perspective. However, there are few studies where the unit of analysis is disaggregated down to the regional level. Therefore, this research aims to explore the importance of infrastructure (social and economic) in the economic growth of Ecuador´s provinces. The methodology used leads to the calculation of a Global Productive Infrastructure Index (GPII) composed of two categories: Social Productive Infrastructure (SIP), and Economic Productive Infrastructure (EPI) (Hansen, 1965). In addition, econometric estimates are made of the relationship between infrastructure and economic growth, the latter measured by the Gross Added Value of each province. The results of the empirical models used indicate that the economic productive infrastructure is essential for the economic growth of Ecuador´s provinces. It is made up of energy infrastructure, transport infrastructure and communications infrastructure, of which the last two are the most representative and affect growth directly. In terms of the disaggregation of indices, it is observed that, in general, the provinces with the highest economic and global index and, therefore, the highest growth are the provinces of Pichincha, Azuay and Guayas.