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Firm Productivity and Cities: The Case of Colombia

Author

Listed:
  • Jorge Balat

    (The University of Texas at Austin)

  • Camila Casas

    (Banco de la República de Colombia)

Abstract

In this paper we study the determinants of firm-level productivity in Colombia. We are interested in the effects of agglomeration forces that explain why manufacturing economic activity tends concentrate geographically as well as the effect of forces that can hurt productivity in high-density areas. An unfortunate major example of the latter forces in Colombia is its high levels of crime and terrorist attacks. We carry out this study by exploiting two very rich data sources: a firm-level panel which allows us to estimate firm-level productivity and a panel of municipality characteristics. To address selection and endogeneity issues in the estimation of firm-level productivity we use a control function approach. Our main findings are the following. First, scale economies do not seem to affect firm-level productivity. Second, we do find evidence of location economies (industrial specialization has a positive effect on productivity). Industrial variety, on the other hand, lowers productivity. It seems that firms in Colombia benefit from forming clusters and locating in cities with less industrial variety. We also find non-trivial effects of city fiscal performance, education level and quality, and crime and violent attacks.

Suggested Citation

  • Jorge Balat & Camila Casas, 2018. "Firm Productivity and Cities: The Case of Colombia," Borradores de Economia 1032, Banco de la Republica de Colombia.
    • Handle: RePEc:bdr:borrec:1032
    DOI: 10.32468/be.1032
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    References listed on IDEAS

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    Cited by:

    1. Luis E. Arango & Sergio A. Rivera, 2020. "“Disemployment” effects of the minimum wage in the Colombian manufacturing sector," Borradores de Economia 1107, Banco de la Republica de Colombia.

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    More about this item

    Keywords

    Cities; Colombia; Productivity; TFP; Total Factor Productivity; Agglomeration;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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