Three Empirical Essays on Concentration of Resources and Economic Growth

Abstract

This thesis focuses on the study of two global trends characteristic of modern economic development, namely increased agglomeration and inequalities within countries. The thesis contributes to the understanding of the evolution of both trends and their impact on economic growth in the long term, using multiple techniques for data analysis, and in the light of the theory and corresponding political debate.

The starting point of the thesis is the idea that agglomeration and inequality represent two dimensions (spatial and personal) of concentration of resources within countries, which is associated with the process of economic development. The thesis consists of an introductory chapter, three main empirical chapters, a general conclusion, and three methodological appendices.

The thesis is mainly a work of applied economics. For the analysis data has been collected for multiple variables and for a large sample of countries worldwide, with the aim of making international comparative analysis. The central dependent variable is the long-run national economic growth rate. Therefore, the analysis conducted is based mostly on the estimation of econometric models of economic growth. Both cross-sectional and panel data are used, covering the 1960-2010 period. Different estimation techniques are studied and applied (from Ordinary Least Squares, Estimates of Fixed Effects, Methodologies Control Functions: "Control Function Approach" Estimates of Fixed Effects with Instrumental Variables and estimates by GMM).

As for the main contributions, beginning with chapter 2, the thesis shows that the benefits of spatial concentration of economic activity appear to depend on a relatively equal distribution of income. Thus, in high-income countries with unequal distribution of resources, geographic concentration appears to be associated with lower economic growth in the long term.

Chapter 3 shows two opposing effects of income inequality on a single model of economic growth. On the one hand a negative effect, associated with inequality of opportunity. On the other hand, a positive effect, associated with unequal outcomes. Likewise, the analysis identifies the transmission channels between inequality and growth to which these two effects relate.

Chapter 4 contributes to the debate on the relationship between economic growth and urban concentration, providing empirical evidence on the relevance of the urban environment. In particular, the quality of urban infrastructure is shown as critical to balance the benefits and costs of concentration in large cities.

Finally, Chapter 5 discusses key findings and policy implications. In particular, the results contextualize the discussion on agglomeration not only in terms of the level of development, but also in terms of distributional problems, and physical aspects of the urban environment. Regarding the level of development, in the case of low-income countries there appears to be a trade-off between efficiency and equity, at least in the short term, due to the fact that increased urban concentration seems desirable for growth but may involve greater inequalities. For high-income countries, by contrast, a more balanced urban system, in which small and medium-sized cities play a key role, appears as a better strategy than intense urban concentration. In terms of distribution, for both high- and low-income, the fact that the benefits derived from agglomeration depend on income inequality highlights the importance of socio-economic and institutional factors in the debate on urban concentration. Finally, as regards the urban environment, the analysis confirms the concern about informal urban settlements (slums), representing a poverty trap for most of its residents, rather than a transient state in the process of structural change.

Esta tesis se centra en el estudio de dos tendencias mundiales características del desarrollo económico moderno, el incremento de la aglomeración y de las desigualdades. Dinámicas hoy por hoy con una marcada dimensión intra-nacional. La tesis contribuye a la comprensión de la evolución de ambas tendencias y a la de su impacto en el crecimiento económico a largo plazo, a partir del análisis de datos y bajo la luz de la teoría y del debate de política correspondiente.

La tesis se centra en análisis comparativo internacional a partir de la estimación de modelos econométricos de crecimiento económico, utilizando diferentes técnicas de estimación. Se presentan un capitulo introductorio, tres capítulos principales, unas conclusiones generales, y tres apéndices metodológicos.

De forma general, los resultados obtenidos contextualizan el debate sobre la aglomeración a nivel nacional no sólo en función del nivel de desarrollo sino también en función de los problemas de distribución y de los aspectos físicos del entorno urbano. En cuanto al nivel de desarrollo, en el caso de los países de bajos ingresos se destaca un conflicto entre eficiencia y equidad, al menos en el corto plazo, debido a que una mayor concentración urbana parece deseable para el crecimiento pero puede implicar mayores desigualdades. Para los países de altos ingresos, por el contrario, un sistema urbano más equilibrado, en el que las pequeñas y medianas ciudades jueguen un papel fundamental, parece ser una estrategia mejor frente a la intensa concentración urbana. En cuanto a la distribución, tanto para países ricos como pobres, se encuentra que los beneficios de la aglomeración dependen de una distribución relativamente igualitaria de los ingresos, destacando la relevancia de los factores socio-económicos e institucionales. Por último, en cuanto al entorno urbano, el análisis realizado confirma la preocupación acerca de los asentamientos urbanos informales (slums) como una trampa de pobreza para la mayoría de sus residentes, más que como un estado transitorio en el proceso de cambio estructural asociado con el desarrollo económico.