Agglomeration Economies: An Analysis of the Determinants of Employment in the Cities of Ecuador

Abstract

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.

Location Decisions of New Manufacturing Firms in Ecuador. Agglomeration Mechanisms

“…In a complementary way, to illustrate the relationship between the number of new firms by sector and canton and the level of employment of the industry itself through Figure 3, it is possible to establish that there is a strong correlation between both of the order of 0.99, as well as a small amount of variation in the creation of new firms. Analysis for the Ecuadorian case was previously performed by Pontarollo et al [85] who verified a special heterogeneity of the cantons; as well as it was found that in the period 1980-2010, the growth of employment in the industrial sector in Ecuador responds to localization economies and not to urbanization economies [38]. Therefore, it seems that there is a clear pattern of permanence in the location of new firms with respect to the location of employment in the sector.…”

“…They suggested that establishments in industries with minor knowledge spillovers, or more labor pooling, are more concentrated. Specifically, for the case of Ecuador Torres et al [38], a concentration index was calculated and they found that the economic activity tends to cluster in relatively few cities, mainly Guayaquil and Quito, those cities that since colonial times have maintained their supremacy over others and, therefore, perform important functions economic, regional, and international.…”

“…These add up to a total of 219, except for the three corresponding to the Insular Region or Galapagos Islands which were not taken into account for this work (these contemplate three islands: San Cristóbal, Isabela, and Santa Cruz), and the areas not delimited (include territories whose boundaries are not clearly defined between provinces and cantons: Las Golondrinas, Manga del Cura, and El Piedrero). It should be clarified that in this study the data is considered at the cantonal level (and not at the city level), just as previous studies [38,85,90] on agglomeration economies carried out for the case of Ecuador did, this is due to the limitations of information and the need to use comparable data in the different years considered.…”

“…ε ic is the error term. Fixed effects are used to try to control external influences in the relationship of the variables, in addition, the empirical evidence in the reference works on this topic use fixed effects to counteract endogeneity [7,38,73,74].…”

Relación entre la competitividad y el desarrollo regional en Ecuador: una aplicación de modelos espaciales

“…La falta de datos temporales impide el análisis de la evolución de las disparidades del ICR. Sin embargo, a nivel cantonal no han existido cambios significativos en la estructura económica del país las últimas décadas como lo demuestran recientemente Torres-Gutiérrez, et al (2019). En consecuencia, el ICR se constituye en un indicador de desarrollo integral de los cantones.…”