Agglomeration Externalities and 1981-2006 Regional Growth in Brazil

This paper focuses on manufacturing employment growth across the 26 states of Brazil. We employ the Glaeser et al. (1992) approach to identify the role played by knowledge externalities in growth and convergence. To assess robustness of the results, we compare cross-section models, dynamic panel models and pooled-periods fixed-effect models. We find that cross-section models confirm the positive impact of Porter’s and Jacobs’ competition externalities on growth, whereas dynamic panel models and pooled-periods fixed-effect models are consistent with the predictions of Marshall-Arrow-Romer and Porter regarding the role of specialisation in manufacturing vis-à-vis other employment. The results provide new insights into the rapid growth since 1981 in particularly the North and Centre West of Brazil.