Historical trades, skills and agglomeration economies

Ehrl, Philipp and Monteiro Monasterio, Leonardo (2016): Historical trades, skills and agglomeration economies.

Abstract

We exploit differences in the spatial distribution of industrial and liberal occupations in the years 1872 and 1920 to instrument for today's concentration of interpersonal and analytical skills in Brazil. The data suggest that the local supply of knowledge and manufacturing provided by these historical trades favored a growth path that has shaped the occupational structure until the present day, whereby the existence of a large local consumer market was a necessary condition for this development. By means of these instruments, we present causal evidence that the regional concentration of interpersonal and analytical skills generates positive wage externalities. Particularly university graduates and workers without formal education benefit most from these agglomeration economies.

• Item Type: MPRA Paper
• Language: English
• Keywords: agglomeration economies, skills, long-run industrial development, Brazil
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C26 - Instrumental Variables (IV) Estimation; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure ; Wage Differentials; N - Economic History > N1 - Macroeconomics and Monetary Economics ; Industrial Structure ; Growth ; Fluctuations > N16 - Latin America ; Caribbean; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics > R12 - Size and Spatial Distributions of Regional Economic Activity

References

Acemoglu, D. and Autor, D. H. (2011). Skills, tasks and technologies: Implications for employment and earnings. In O. Ashenfelter and D. Card (eds.), Handbook of Labor Economics, vol. 4, Elsevier – North Holland, pp. 1043–1171.

Acemoglu, D. Johnson, S. and Robinson, J. A. (2001). The colonial origins of comparative development: An empirical investigation. American Economic Review, 91 (5), 1369–1401.

Andersson, M., Klaesson, J. and Larsson, J. P. (2014). The sources of the urban wage premium by worker skills: Spatial sorting or agglomeration economies? Papers in Regional Science, 93 (4), 727–747.

Arrow, K. J. (1962). The economic implications of learning by doing. Review of Economic Studies, 29 (3), 155–173.

Autor, D. H., Katz, L. F. and Kearney, M. S. (2008). Trends in US wage inequality: Revising the revisionists. Review of Economics and Statistics, 90 (2), 300–323.

Autor, D. H. Levy, F. and Murnane, R. J. (2003). The skill content of recent technological change: An empirical investigation. Quarterly Journal of Economics, 118 (4), 1279–1333.

Bacolod, M., Blum, B. S. and Strange, W. C. (2009a). Skills in the city. Journal of Urban Economics, 65 (2), 136–153.

Bacolod, M., Blum, B. S. and Strange, W. C. (2009b). Urban interactions: soft skills versus specialization. Journal of Economic Geography, 9 (2), 227–262.

Baum, C. F., Schaffer, M. E. and Stillman, S. (2007). Enhanced routines for instrumental variables/GMM estimation and testing. Stata Journal, 7 (4), 465–506.

Botelho, T. R. (2005). Censos e construção nacional no Brasil Imperial. Tempo Social, 17 (1), 321–341.

Chaudhary, L., Musacchio, A., Nafziger, S. and Yan, S. (2012). Big BRICs, weak foundations: The beginning of public elementary education in Brazil, Russia, India, and China. Explorations in Economic History, 49 (2), 221–240.

Ciccone, A. and Hall, R. E. (1996). Productivity and the density of economic activity. American Economic Review, 86 (1), 54–70.

Combes, P., Duranton, G. and Gobillon, L. (2008). Spatial wage disparities: Sorting matters! Journal of Urban Economics, 63 (2), 723–742.

Combes, P. P., Duranton, G., Gobillon, L. and Roux, S. (2010). Estimating agglomeration economies with history, geology, and worker effects. In E. L. Glaeser (ed.), Agglomeration Economics, University of Chicago Press, pp. 15–66.

Combes, P.-P. and Gobillon, L. (2015). The empirics of agglomeration economies. In G. Duranton, V. Henderson and W. Strange (eds.), Handbook of Urban and Regional Economics, vol. 5, Elsevier – North Holland.

Dell, M. (2010). The persistent effects of Peru’s mining Mita. Econometrica, 78 (6), 1863–1903.

Duranton, G. and Puga, D. (2001). Nursery cities: Urban diversity, process innovation, and the life cycle of products. American Economic Review, pp. 1454–1477.

Duranton, G. and Puga, D. (2004). Micro-foundations of urban agglomeration economies. In V. Henderson and J. F. Thisse (eds.), Handbook of Regional and Urban Economics, vol. 4, Elsevier – North Holland, pp. 2063–2117.

Eeckhout, J., Pinheiro, R. and Schmidheiny, K. (2014a). Spatial sorting. Journal of Political Economy, 122 (3), 554–620.

Ehrl, P. (2014a). A breakdown of residual wage inequality in Germany. BGPE Discussion Paper, 150.

Ehrl, P. (2014b). Task trade and the employment pattern: the offshoring and onshoring of brazilian firms. BGPE Discussion Paper, 151.

Ehrl, P. (2015). Minimum Comparable Areas for the period 1872–2010: An aggregation of Brazilian municipalities. mimeo.

Fávero, M. d. L. d. A. (2006). A universidade no Brasil: das origens à reforma universitária de 1968. Educar, 28, 17–36.

Finlay, K., Magnusson, L. and Schaffer, M. (2013). weakiv: Weakinstrument-robust tests and confidence intervals for instrumental-variable (IV) estimation of linear, probit and tobit models. http://ideas. repec. org/c/boc/bocode/s457684.html.

Firpo, S., Fortin, N. M. and Lemieux, T. (2011). Occupational tasks and changes in the wage structure. IZA Discussion Paper No. 5542.

Florida, R., Mellander, C., Stolarick, K. and Ross, A. (2012). Cities, skills and wages. Journal of Economic Geography, 12 (2), 355–377.

Fujita, M., Krugman, P. R. and Venables, A. J. (2001). The spatial economy: Cities, regions, and international trade. MIT press.

Fujita, M and Thisse, J.-F. (2002). Economics of Agglomeration: Cities, Industrial Location, and Regional Growth. Cambridge University Press.

Glaeser, E. (1999). Learning in cities. Journal of Urban Economics, 46 (2), 254–277.

Glaeser, E and Maré, D. (2001). Cities and skills. Journal of Labor Economics, 19 (2), 316–342.

Glaeser, E. L., Kallal, H. D., Scheinkman, J. A. and Shleifer, A. (1992). Growth in cities. Journal of Political Economy, 100 (6), 1126–1152.

Henderson, V., Kuncoro, A. and Turner, M. (1995). Industrial development in cities. Journal of Political Economy, 103 (5), 1067–1090.

IBGE (2010). Censo Demográfico 2010 – Notas Metodológicas. IBGE: Rio de Janeiro.

Kang, T. H. (2010). Instituições, voz política e atraso educacional no Brasil, 1930-1964. Ph.D. thesis, Universidade de São Paulo.

Levy, M. S. F. (1974). O papel da migração internacional na evolução da população brasileira (1872 a 1972). Revista de Saúde Pública, 8 (supl.), 49–90.

Maciente, A. N. (2013). The determinants of agglomeration in Brazil. Ph.D. thesis, University of Illinois at Urbana-Champaign.

Marcondes, R. L. (2012). O mercado brasileiro do século xix: uma visão por meio do comércio de cabotagem. Revista de Economia Política, 32 (1), 142–166.

Marshall, A. (1890). Principles of Economics. London: Macmillan, 1961, 9th edn.

Mello, P. C. d. (1984). A economia da escravidão nas fazendas de café: 1850-1888. PNPE: Rio de Janeiro.

Michaels, G., Rauch, F. and Redding, S. J. (2013). Task specialization in US cities from 1880-2000. NBER Working Paper, 18715.

Monasterio, L. M. and Reis, E. (2008). Mudanças na concentração espacial das ocupações nas atividades manufatureiras no Brasil: 1872-1920. IPEA Texto para discussão, 1361.

Moulton, B. R. (1986). Random group effects and the precision of regression estimates. Journal of Econometrics, 32 (3), 385–397.

Naritomi, J., Soares, R. R. and Assunção, J. J. (2012). Institutional development and colonial heritage within brazil. Journal of Economic History, 72 (02), 393–422.

Nunn, N. (2008). Slavery, inequality, and economic development in the Americas: An examination of the Engerman-Sokoloff hypothesis. In E. Helpman (ed.), Institutions and Economic Performance, Harvard University Press.

Olea, J. L. M. and Pflüger, C. (2013). A robust test for weak instruments. Journal of Business & Economic Statistics, 31 (3), 358–369.

Reis, E. (2014). Spatial income inequality in Brazil, 1872–2000. Economia, 15 (2), 119–140.

Reis, E., Cossio, F. B., Morandi, L., Medina, M. and Abreu, M. (2002). O Século XX nas contas nacionais. IBGE: Brasília.

Reis, E., Pimentel, M., Alvarenga, A. I. and dos Santos M. C. H. (2011). Áreas mínimas comparáveis para os períodos intercensitários de 1872 a 2000. In 1 o Simpósio Brasileiro de Cartografia histórica.

Rosenthal, S. S. and Strange, W. C. (2004). Evidence on the nature and sources of agglomeration economies. In V. Henderson and J. F. Thisse (eds.), Handbook of Regional and Urban Economics, vol. 4, Elsevier – North Holland, pp. 2119–2171.

Rosenthal, S. S. and Strange, W. C. (2008). The attenuation of human capital spillovers. Journal of Urban Economics, 64 (2), 373–389.

Spitz-Oener, A. (2006). Technical change, job tasks, and rising educational demands: Looking outside the wage structure. Journal of Labor Economics, 24 (2), 235–270.

Stock, J. H. and Yogo, M. (2005). Testing for weak instruments in linear IV regression. In D. W. Andrews and J. H. Stock (eds.), Identification and inference for econometric models: Essays in honor of Thomas Rothenberg, Cambridge University Press, Cambridge, pp. 80–108.

Stolz, Y., Baten, J. and Botelho, T. (2013). Growth effects of nineteenth-century mass migrations: "Fome Zero" for Brazil? European Review of Economic History, 17 (1), 95–121.

The Maddison-Project (2010). Statistics on world population, GDP and per capita GDP, 1-2008 AD.

von Thünen, J. H. (1826/1966). Der isolierte Staat in Beziehung auf Landwirtschaft und Nationalökonomie. Perthes – Hamburg, translated from German by C. M. Wartenberg (1966) Von Thünen’s Isolated State, Oxford – Pergamon Press.