instrumented TFPQ using Foster et al. estimates are also relatively unchanged with only Chile positive and Colombia now significantly negative at -.025, while Indonesia and Ethiopia remain statistically insignificant. TFPQ à la De Loecker et al estimates are _null_ for all countries, including Chile, although preserving the ranking found in the OLS estimates.

Chile remains the only country with a negative price elasticity, but now Colombia enters with a strongly significant positive coefficient while Indonesia and Ethiopia are positive but insignificant. Mark-ups broadly follow the previous pattern, albeit with Colombia gaining significance and Ethiopia losing it, but again, all but Chile showing negative coefficients. Marginal costs closely follow the pattern from the OLS results with Chile showing the only negative and significant value, but now with Colombia showing a higher positive and significant coefficient. In sum, the key magnitudes and patterns across levels of development largely hold.

# _Controlling for selection effects._

Since better firms may also be attracted to cities, ideally, we would like to control for, for instance, managerial quality or technological capabilities. Such data is only beginning to become available at the firm level. As an alternative, table 2, panel c reruns the OLS specification but with complete plant-level fixed effects. This is highly imperfect since, in the absence of a large number of plants moving from low to high density areas, we are also stripping out any plant specific agglomeration effects arising from being born in a particular density area. The results are, as expected, much weaker: there is a much less clear pattern of wage and TFPR elasticities with Indonesia alone retaining high and significant wage and TFPR elasticities and Colombia and Ethiopia now showing negative wage elasticities. This said, the TFPQ elasticities broadly retain the previous pattern with Chile showing the only positive and significant coefficient. Further, the previous pattern on prices and marginal cost showing Chile with the only significant and negative result continues to hold. Agglomeration continues to put downward pressure on mark-ups.

Cities may also attract a better quality of labor and the availability of local literacy data from Colombia and Indonesia offers a proxy for level of local human capital to potentially control for compositional effects (Table 2, panel d).<sup>15</sup> In Indonesia, the wage and TFPR elasticity estimates are lower, falling from .056 to .04 and .022 to .016 respectively, while the TFPQ elasticity using Foster et al. (2008) falls from - .011 to -.021, in both cases still insignificantly so. Price, mark-ups and marginal costs change marginally. By contrast, in Colombia, the wage elasticity increases slightly from .038 to .04 while TFPR rises from .003 to a now significant .005 suggesting that human capital in poor, traditional economies is highly heterogeneous (Chauvin et al 2017). Point estimates for the TFPQ elasticity fall from -.004 to -006, but in both cases insignificant.

> 15 In Chile and Ethiopia, we did not have access to local human capital by our spatial identifiers.

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