Almeida, RitaFernandes, Ana M.2013-05-092013-05-092012-04-05Applied Economics0003-6846https://hdl.handle.net/10986/13352This article investigates whether the agglomeration of economic activity in regional clusters affects long-run manufacturing Total Factor Productivity (TFP) growth in an emerging market context. We explore a large firm-level panel dataset for Chile during a period characterized by high growth rates and rising regional income inequality (1992–2004). Our findings are clear-cut. Locations with greater concentration of a particular sector have not experienced faster TFP growth during this period. Rather, local sector diversity was associated with higher long-run TFP growth. However, there is no evidence that the diversity effect was driven by the local interaction with a set of suppliers and/or clients. We interpret this as evidence that agglomeration economies are driven by other factors such as the sharing of access to specialized inputs not provided solely by a single sector, e.g. skills or financing.en-USCC BY-NC-ND 3.0 IGOagglomeration economieslocal growthknowledge spilloverstotal factor productivity growthJournal ArticleWorld Bank10.1596/13352