Agglomeration and Growth: Cross-Country Evidence¤

We investigate the impact of within-country spatial concentration of economic ac-tivity on country-level growth, using cross-section OLS and dynamic panel GMM esti-mation. Agglomeration is measured alternatively through measures of urbanization and through indices of spatial concentration based on data for sub-national regions. Across estimation techniques, data sets and variable de…nitions, we …nd evidence that supports the “Williamson hypothesis”: agglomeration boosts GDP growth only up to a certain level of economic development. The critical level is estimated at some USD 10,000, corresponding roughly to the current per-capita income level of Brazil or Bulgaria. This implies that the tradeo ¤ between national growth and inter-regional equality may gradually lose its relevance