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

Abstract

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.