The effect of regional urban structure on economic performance in Mexico

This thesis identified the effects of agglomeration economies and the degree of polycentricity on Mexican urban regions' labour productivity for the whole economy and the two most significant sectors: manufacturing and services. To achieve this, two statistical techniques were used based on cross-sectional data: OLS and TSLS, which allows for eliminating the endogeneity relationship between productivity and size and spatial structure. The results obtained are summarised into five main findings: • Finding 1. Positive and significant effects of agglomeration on productivity are mainly observed in the service sector but not in manufacturing. These effects surpass 21% in all the specifications, which notably exceeds the results observed in other studies in the region. • Finding 2. The degree of polycentricity has a negative effect on productivity when analysing results by sector, not in the aggregate. A more evenly distributed urban population across cities affect manufacturing (only under OLS specifications) and service productivity. • Finding 3. In the service sector, the effect of polycentricity increases when the size of urban regions grows. For the manufacturing sector, mixed results are observed. This positive association indicates that by keeping the degree of polycentricity constant, cities with more inhabitants will reach higher levels of labour productivity. • Finding 4. In Mexico, there are no significant and stable differences in the aggregate labour productivity of the different macro-regions. The differences found depend highly on the specifications used and the sector analysed. In the OLS models for the service sector, it is possible to identify higher productivity levels in the Centre-west to and North macro-regions. • Finding 5. The effect of agglomeration and the degree of polycentricity vary significantly between the manufacturing and service sectors, where the greatest effects of size and urban structure are reflected. This work contributes to close the gaps in the evidence available on agglomeration economics and spatial structure on economic performance in the global south, particularly in Latin America. The empirical results could serve to feed national policies with an explicit spatial focus that seeks to improve the productivity of urban regions by reducing territorial inequalities that prevail in Mexico. Achieving a more balanced and convergent development path requires awareness of the importance of place-based policies in a context of economic globalisation and consolidation of trade liberalisation with North America. More in-depth empirical research is required to refine the findings based on more disaggregated territorial data, new information generation techniques, and longitudinal econometric methods.