Growth in Cities: Mexico Case Study.
- Theories of economic growth have emphasized the importance of economies of agglomeration in generating growth. The physical proximity between firms increases productivity through input sharing, labor pooling, matching and knowledge spillovers. Jacobs (1969), Porter (1990), and Marshal-Arrow-Romer (1890-1962-1986) have stressed the importance of knowledge spillovers in an urban agglomeration as dyn... read moreamic externalities that generate economic growth. However, these theories differ in the role of local competition, city specialization and diversity in generating growth. Glaeser et al. (1992) tested the different theories of dynamic externalities using U.S. data and found that city diversity and local competition generate growth. Replicating the Glaeser et al. (1992) model and data from 56 Mexican metropolitan areas, I find that city diversity and local competition have a positive effect on growth, whereas geographic specialization hindered job creation in Mexico.read less