Urban Agglomeration and Economic Growth in Latin America Miguel Atienza and Patricio Aroca y paroca@ucn.cl, www.idear.ucn.cl www.milenio.ucn.cl Universidad Católica del Norte, CHILE International Urban Economic Modeling Workshop at University of Sao Paulo Sao Paulo, July 10, 2012
MOTIVATION
Chilean Development Economic Model Open Market Promote Export Policy Macroeconomic Stability
PRODUCT DIVERSIFICATION (1975-2008) 6000 EVOLUTION OF NUMBER OF EXPORT PRODUCTS 5000 4000 3000 2000 1000 0 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008
EXPORTER DIVERSIFICATION DE (1975-2008) 9000 EVOLUTION OF NUMBER OF FIRMS INVOLVED IN DIRECT EXPORTS 8000 7000 6000 5000 4000 3000 2000 1000 0 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008
MARKET DIVERSIFICATION (1975-2008) 210 EVOLUTION OF NUMBER MARKETS WHERE CHILEAN EXPORTS GO 180 150 120 90 60 30 0 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008
Main explanation Reduction on the TFP growth There is not spatial consideration on the evaluation What about concentration around the main metropolitan area?
45% Share of Population Living at Santiago 40% 35% y = 0.0025x - 4.659 R² = 0.9648 2009 30% 1987 Participación RM 25% 20% % RM Lineal (% RM) 15% 10% 5% 0% 1865 1875 1885 1895 1905 1915 1925 1935 1945 1955 1965 1975 1985 1995 2005 Años
Concentration and Growth Concentration Trade off between efficiency and equity Inefficient Spatial Concentration Dominant paradigm Williamson, 1965 GDP pc
From New Economic Geography or NECG Concentration and Growth reinforce each other (Fujita y Thisse, 2002) Spatial Concentration induce more growth and vice versa (Baldwin y Martin, 2004) Concentration reinforce growth => the more concentrated is the economy the higher the growth (Martin y Ottaviano, 1999) Martin, P. and G. Ottaviano (1999). Growing locations: Industry location in a model of endogenous growth. European Economic Review 43 (2), 281 302. Fujita, M. and J-F. Thisse (2002). Economics of Agglomeration: Cities, Industrial Location, and Regional Growth. Cambridge University Press. Baldwin, R. E. y P. Martin (2004). Agglomeration and regional growth. In: Henderson, V. J. and J-F. Thisse (Eds.), Handbook of Regional and Urban Economics, vol. 4: Cities and Geography. Elsevier, North-Holland.
2011
How much growth cost the current concentration?
Take more advantage of regional assets Concentration might cost 1 to 1.5 point of growth per year
Hypothesis: Concentration and Growth Concentration Latin American Countries More developed countries African and less developed countries Williamson, 1965 GDP pc
Empirical results
Wheaton, W. y Shishido, H. (1981). Urban concentration, agglomeration economies, and the level of economic development. Economic Development and Cultural Change, 30, 17-30. MacKellar, F.L. y D.R. Vining (1995). Population Concentration in Less Development Countris: New Evidence. Papers in Regional Science, 74, 3, 259-293. Moomaw, R.L. y M.A. Alwosabi (2004). An empirical analysis of competing explanations of urban primacy evidence from Asia and the Americas. Annals of Regional Science, 38, 149 171
Concentration and Growth Concentration Williamson, 1965 GDP pc
GDP pc and Concentration Wheaton y Shishido (1981) -> US$ 2000 MacKellar y Vining (1995) -> US$ 5000 (US$ of 1985, US$ 8384 in US$ of 2006
2009
Urban Concentration effect on Growth d(crecimiento)/d(urban750) -.0005 0.0.0005 Equivalente a US$ 10.048 6 7 8 9 10 log(pib per cápita) Adaptación Figura 3 de Brülhart y Sbergami, 2009
Concentration and Growth Fuente:Brülhart y Sbergami, 2009.
Concentration and Growth Fuente:Brülhart y Sbergami, 2009.
Evolution
80.0% Primacy Index 750 versus GDPpc for 1960 (85 Countries) 70.0% 60.0% 50.0% Uruguay Argentina 40.0% Chile Venezuela 30.0% ColombiaBrazil Paraguay Peru 20.0% Ecuador Bolivia 10.0% 0.0% - 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000
80.0% Primacy Index 750 versus GDPpc for 1970 (85 Countries) 70.0% 60.0% 50.0% Uruguay Argentina 40.0% Chile Venezuela 30.0% 20.0% Colombia Brazil Peru Paraguay Ecuador Bolivia 10.0% 0.0% - 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000
80.0% Primacy Index 750 versus GDPpc for 1980 (85 Countries) 70.0% 60.0% 50.0% Chile Uruguay Argentina 40.0% Korea Colombia Venezuela Brazil Portugal 30.0% Peru Paraguay Ecuador Bolivia 20.0% 10.0% 0.0% - 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000
80.0% Primacy Index 750 versus GDPpc for 1990 (85 Countries) 70.0% 60.0% 50.0% Uruguay Argentina Chile Korea 40.0% 30.0% Brazil Colombia Venezuela Peru Paraguay Ecuador Bolivia Portugal 20.0% 10.0% 0.0% - 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000
80.0% Primacy Index 750 versus GDPpc for 2000 (85 Countries) 70.0% 60.0% Korea 50.0% 40.0% 30.0% Uruguay Argentina Chile Brazil Colombia Venezuela Peru Bolivia Paraguay Ecuador Portugal 20.0% 10.0% 0.0% - 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000
80.0% Primacy Index 750 versus GDPpc for 2010 (85 Countries) 70.0% 60.0% Korea 50.0% 40.0% 30.0% Uruguay Argentina Chile Colombia Brazil Venezuela Bolivia Peru Paraguay Ecuador Portugal 20.0% 10.0% 0.0% - 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000
CHALLENGES & CONCLUSION
Urban Agglomeration and Economic Growth in Latin America Miguel Atienza and Patricio Aroca y paroca@ucn.cl, www.idear.ucn.cl www.milenio.ucn.cl Universidad Católica del Norte, CHILE International Urban Economic Modeling Workshop at University of Sao Paulo Sao Paulo, July 10, 2012