TESTING FOR CAUSALITY BETWEEN PRODUCTIVITY AND AGGLOMERATION ECONOMIES

ABSTRACT The productivity effects of agglomeration economies are often treated as endogenous in empirical work due to the potential for reverse causality. The extent to which these relationships are actually simultaneously determined, however, remains largely unobserved. This paper estimates panel data vector autoregressions for different sectors of the economy to test for bidirectional causality between productivity and both localization and urbanization economies. The aim is to address some key questions that will help to identify the extent of the endogeneity problem. Can we actually observe bidirectionality in the data? Does it feature more for some industries than for others? Is it more prevalent for localization or urbanization economies? The results show that agglomeration economies are not strictly unidirectional and that higher levels of productivity can induce growth in the scale of local urban and industrial environments. The paper discusses the difficulties that these issues pose for the estimation of agglomeration economies.     

Where East Meets West: The Formative in Mexico’s Central Highlands

Mexico’s Central Highlands form one of Mesoamerica’s fundamental cultural seams, a point of overlap between two traditions, one to the east and the other to the west. Although this area is usually included in the west, it can be more productively viewed as an interface, the physical space where people, goods, and ideas passed from one side to the other, and thus it holds many keys for our understanding of emerging social complexity in Mesoamerica. In reviewing the last two decades of Formative period (1500 BC–AD 100) research in this crucial territory, we focus on themes that reveal the variation and dynamism of interregional interaction, including the formation of regional traditions, exchange systems, and foreign “influence,” and others that help contextualize the events and processes of that time, like household studies and environmental degradation. We stress that this part of Mexico is undergoing relentless development so time is of the essence if we are to broaden our perspectives on social evolution in the Central Highlands. This issue cannot be resolved by rescue and salvage work because it requires long-term, interdisciplinary projects to unravel multifaceted problems.