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Growth agglomeration effects in spatially interdependent Latin American regions

Abstract:

We investigate the effect of agglomeration on regional growth in Latin America, using panel data and spatial panel data techniques. By exploring the role of development in the agglomeration-growth relationship, we find evidence of the Williamson’s hypothesis: agglomeration growth effects are magnified in less-developed regions. Moreover, we measure how the economic growth of one region can affect its neighbouring regions’ economic growth. The results of the Spatial Autoregressive model show that international connections of Latin American regions are beneficial to obtain positive spatial effects of agglomeration. Nevertheless, spatial effects are stronger within countries. This finding points out the strong border effects in Latin America.