Three Essays on Agglomeration Economies in Ecuador

Abstract

This thesis focuses on analyzing agglomeration effects in Ecuador. The thesis is divided into five chapters. The first chapter is an introductory chapter where it is focused on the motivation of the case study and the importance of studying agglomeration economies in developing countries. The chapter two is devoted to identifying the Functional Urban Areas in Ecuador. This identification is important because Ecuador does not follow an adequate definition of economic urban areas. However, Ecuador does not also have information available to identify Functional Urban Areas, the Functional urban area identification is based on population density per squared kilometer and commuting census. Thus, this chapter presents an identification of Functional Urban Areas on the basis of satellite data to get data on population density in grid cells of one squared kilometer and road network system of Ecuador to identify urban center and using the concept of proximity to connect those urban centers from an economic point of view. A function of proximity measured in travel time which varies according to the size of each urban core is estimated to connect the urban cores and to define the final boundaries of the Functional Urban Areas. Chapter three is devoted to analyzing agglomeration effects on labor productivity, analyzing the 28 Functional Urban Areas identified in the previous essay. The data used in this chapter is micro data of workers, called ENEMDU surveys, to evaluate wages as an indicator of labor productivity during the period 2005-2015. In addition, we include the consideration of analyzing the labor market divided in the formal and informal sector. Finding presents that larger cities are more productive in Ecuador. The two variables analyzed are total market size and local specialization index. Findings show that agglomeration effects are positive and significant, with a magnitude lower than other developing economies studied so far. Moreover, it is founded that both sectors, formal and informal benefits from working in larger cities, but informal in less magnitude. The channels of the agglomeration are also studied. Chapter four presents the analysis of city size and slum for the 28 Functional Urban Areas introduced in chapter two. To address slums in Ecuador, it is proxied through several measures that combines bad material of the houses and lack of coverage of basic infrastructure. Moreover, it is going beyond the dichotomy of slum identification, by means of measuring the slum level of the households. Three indexes are built to measure slum level at a micro-level of households. The data is gathered from the national censuses of the population of Ecuador in 1990, 2001 and 2010. It is founded a negative relationship between city size and slum characteristics, indicating that larger cities in Ecuador offer lower level of slum characteristics. Moreover, it is analyzed the new areas created in the largest city of Ecuador, named as Guayaquil, over the period of analysis, results show that new extension are characterized by slum incidents. Chapter five introduces the final conclusions. The conclusion shows that Ecuador presents positive and significant agglomeration effects, that benefit both sectors, formal and informal, but informal in less magnitude. Moreover, it is considered that Functional Urban Areas presents are preferred for urban planning and policy considerations. The importance of improving the quality of the labor force in Ecuador, and the needs of monitoring slums characteristics in Ecuador.