Brazilian municipalities: Agglomeration economies and development levels in 1997 and 2007

This article sets out to analyse the relation between agglomeration economies —both the Marshall-Arrow-Romer type (economies of specialization) and the Jacobs-Porter type (economies of diversification)— and the unequal development of Brazilian municipalities as estimated by labour productivity (measured by the average wage). To that end, measures of specialization were constructed for 1997 and 2007, and the data were used to test the relation between the industrial specialization and diversification indices and productivity, using finite-mixture regressions to capture the heterogeneity of the data. The results confirm the duality existing between the north-northeast and south-southeast-centre-west regions of Brazil, which has been widely documented in other research. Nonetheless, this duality needs to be analysed further, because some cities do not reflect the general dynamic of their region.