The spatial scope of agglomeration economies in Brazil

Abstract

This paper provides evidence about location and colocation patterns of manufacturing entrepreneurship and spatial scope of agglomeration economies in the context of a developing country. Using microgeographic data for all Brazilian manufacturing activities and distance-based measures, we find clear patterns of colocalization between entrants and existing establishments, and that these patterns occur mainly at short distances. For activities presenting colocalization between entrants and existing establishments, our results also indicate that a greater number of incumbent establishments in a given location positively affects the number of entrant establishments that decide to locate there, an effect that attenuates rapidly with distance (generally disappearing after 5 km). This pattern of attenuation is robust to both the inclusion of a comprehensive set of controls for observable and unobservable local characteristics and the use of instrumental variables to address remaining endogeneity concerns.