The Importance of Increasing Returns to Scale in the Process of Agglomeration in Portugal: A Non-linear Empirical Analysis

TL;DR

This paper empirically demonstrates that increasing returns to scale and low transport costs are key factors driving regional agglomeration in Portugal, confirming theoretical predictions of New Economic Geography models.

Contribution

It provides the first non-linear empirical analysis validating the role of increasing returns to scale in Portuguese regional agglomeration.

Findings

Increasing returns to scale are present in Portuguese regions.

Low transport costs facilitate regional clustering.

Agglomeration in Portugal is confirmed by empirical evidence.

Abstract

With this work we try to analyse the agglomeration process in the Portuguese regions, using the New Economic Geography models. In these models the base idea is that where has increasing returns to scale in the manufactured industry and low transport costs, there is agglomeration. Of referring, as summary conclusion, that with this work the existence of increasing returns to scale and low transport cost, in the Portuguese regions, was proven and as such the existence of agglomeration in Portugal.