Urban structure, location of economic activity and aggregate growth: empirical evidence and policies

This thesis explores two distinct but related aspects of the relationship between the spatial location of people within a country and national economic growth. The first three essays set out to establish whether a country’s urban structure impacts economic growth at the aggregate level. Each paper explores a different aspect of the location of people, including the level of urban concentration and the size of a country’s cities. The analyses rely on cross-country regressions and employ different estimation techniques, including fixed effects, system GMM and instrumental variables. Particular attention is paid to whether the relationship differs between developed and developing countries and how contextual factors, such as a country’s economic structure and government capacity, shape the relationship. Across the three papers, the results consistently suggest that concentration and larger cities can be growth promoting at the country level; however only in developed countries or if certain contextual factors are met. The findings add to a growing body of empirical literature which questions the universal validity of the benefits of agglomeration for economic growth. Furthermore, they specifically address a gap in the empirical literature which so far had failed to link city size to aggregate growth as opposed to city-level productivity. The fourth essay moves to the policy level and analyses Special Economic Zones (SEZs) – a policy which isfrequently employed to influence the location of economic activity and people. Specifically, it studies the performance drivers of SEZs. A scarcity of data has limited quantitative research on this topic so far. The analysis relies on a novel dataset, which resorts to nightlights as SEZ performance proxy and covers zone and policy characteristics for SEZs in 22 countries. The findings partially confirm, but also refute the dominant knowledge on the viability of SEZs. While larger zones tend to perform better, growth is difficult to sustain over time and particularly hard to achieve for high-technology focused zones. Other factors commonly assumed to matter, such as the nature of the zone operator, the incentive package and programme set-up, seem to be highly context dependent. Furthermore, contextual factors, such as proximity to markets and a pre-existing industrial base, influence zone performance