The spatial concentration of high-skilled workers and city productivity: the case of Latin America

The aim of this study is to cast light on the relationship between the spatial concentration of high-skilled workers and the productivity of cities in Latin America. The relationship is not clear at first sight. On the one hand, the segregation of high-skilled workers should create agglomeration economies and give rise to positive spillovers amongst the most advantaged, offsetting productivity losses that result from the existence of ghettos of low-skilled workers. On the other hand, it may well be that these spillovers are not enough to compensate for the loss of productivity in the worse-off groups, so that aggregate productivity is negatively affected. We analysed this segregation for a group of Latin America’s largest cities and found a negative and significant relationship between the productivity of cities and the segregation of high-skilled workers. However, we also found evidence of a quadratic relationship between segregation and productivity. home rent-seeking. home effect interaction between scale economies in and interaction expansion of the home market in a self-reinforcing process of agglomeration. Consumption and rent-seeking are sources of agglomeration economies that work through mechanisms unrelated to productivity. On the empirical side, various studies have tried to measure the impact of agglomeration economies on the productivity of cities. Looking at the manufacturing sector, Fogarty and Garofalo find the elasticity of productivity to city size to be about 0.05 for a sample of 13 large metropolitan areas from This means that the total factor productivity (TFP) of the manufacturing sector increases by 10% when the size of the city is doubled. Tabuchi using labour productivity, finds this elasticity to be about 0.02 for Japanese cities in 1980. These studies show the positive relationship between agglomeration economies and productivity in cities.