Effects of dynamic and spatial externalities on local growth: Evidence from Brazil

Abstract

This paper analyses the impact of economic externalities on the local growth emphasizing the industrial, geographic, and temporal scope of agglomeration economies. Thus, we estimated a spatial dynamic panel model using GMM associated with the use of data at different levels of sectoral aggregation. Estimation takes into account the endogeneity of agglomeration economies. Our database consists of 558 Brazilian regions for 1995–2015. The main results suggest that while externalities act in a local dimension they also have a regional scale. These externalities are determined by their temporal trajectory. The effects of agglomeration economies on local growth are sensitive to the choice of sectoral aggregation. Local growth exhibits positive specialization effects and negative diversity effects. However, greater industrial diversity of neighbouring regions has a positive impact on local growth.

Related variety and employment growth: a spatial dynamic model for Brazilian microregions

“…Most of the previous studies showed positive effects for Brazilian regions concerning diversification (Badia & Figueiredo, 2007;Silva & Silveira Neto, 2007;Fochezatto & Valentini, 2010;Catela et al, 2010). Barufi et al (2016) found this for high technological sectors, while Araújo et al (2018) sees positive effects from diversification from neighbouring regions.…”

“…Most of the previous studies showed positive effects for Brazilian regions concerning diversification (Badia & Figueiredo, ; Silva & Silveira Neto, ; Fochezatto & Valentini, ; Catela et al, ). Barufi et al () found this for high technological sectors, while Araújo et al () sees positive effects from diversification from neighbouring regions. What can be seen here is that in fact the positive effects from diversification emanate when sectors are diversified, but related with each other.…”

“…Moreover, the ratio between the spillover and direct effects of the SLX model, in contrast to the SAR and SAC models, is different for every explanatory variable (Gibbons & Overman, ). The SLX model also enables the application of non‐spatial econometric techniques such as using instruments for endogenous variables, as used in Dauth () and Araújo et al ().…”

“…Because of this, the authors argue that a single theoretical framework on agglomeration economics is not enough to explain the effects of the externalities on an economy because specialization, diversification, and competition affect different industries in a heterogenic way, according to its technological intensity. Araújo, Gonçalves, and Almeida () analysed the impact of economic externalities on the local growth emphasizing the industrial, geographic, and temporal scope of agglomeration economies and using different levels of sectoral aggregation for 558 Brazilian regions over 1995–2015. They found that the effects of agglomeration economies on local growth are sensitive to the choice of sectoral aggregation.…”

How are the potential gains from economic activity transmitted to the labour factor: more employment or more wages? Evidence from the Portuguese context

“…In particular, the use of spatial econometric techniques to study the existence of the referred non‐linearities. Adding to this, Mameli, Faggian, and Mccann (), Beaudry and Schiffauerova () and Araújo, Gonçalves, and Almeida () also sustained that the level of industry aggregation influences the empirical outcomes even for the same spatial units. Therefore, future studies should consider a more detailed industrial aggregation level but also more detailed regional aggregation.…”