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

Author:	Almeida, Rita; Fernandes, Ana M.;	Collection Title:	Policy Research working paper ; no. WPS 5891
Country:	Chile;	Date Stored:	2011/12/01
Document Date:	2011/12/01	Document Type:	Policy Research Working Paper
Language:	English	Region:	Latin America & Caribbean
Report Number:	WPS5891	SubTopics:	Achieving Shared Growth; Political Economy; Economic Theory & Research; Labor Policies; Economic Growth
Volume No:	1 of 1

Summary: This paper investigates whether the agglomeration of economic activity in regional clusters affects long-run manufacturing total factor productivity growth in an emerging market context. It explores a large firm-level panel dataset for Chile during a period characterized by high growth rates and rising regional income inequality (1992-2004). The findings are clear-cut. Locations with greater concentration of a particular sector did not experience faster growth in total factor productivity during this period. Rather, local sector diversity was associated with higher long-run growth in total factor productivity. However, there is no evidence that the diversity effect was driven by the local interaction with a set of suppliers and/or clients. The authors 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, such as skills or financing.


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