outside the smallest firms. This means that we are asking whether increased density resulted in job growth in larger firms, the kinds of firms that would be growing and creating employment if there were benefits from agglomeration.

The other reason for including firms with 5 or more persons engaged is that jobs in these firms are the kinds of jobs policy makers would be wanting to generate‐ they pay more and are more stable than own account work or employment in a very small firm. We have not used the enterprise surveys because in surveying only formal firms they exclude the vast majority of employment in Ghana. Our cutoff of 5 persons engaged means, for example, that the 2014 firm census captured 63% of the employees who reported being employed in the population census around the same time.

The second urbanization economy we can investigate is the impact of industrial diversity in a location. We cannot reject the hypothesis that there is no effect of diversity on district‐industry employment growth across all specifications. Combes and Gobillion’s (2015) summary of the effects of diversity is that there is no robust effect on employment growth, so our finding is perhaps not surprising, despite the headline findings of the importance of diversity, beginning with Henderson et al (1995).

Besides the general characteristics of an area, the characteristics of particular industries within an area have also been found to be important determinants of growth and productivity in the agglomeration literature. Table 6 shows the effects of specialization, competition and average firm size in an industry‐district on employment growth. The main results across the regressions are that these characteristics all have large, statistically significant and _negative_ effects on employment growth in an industry district normalized by that industry’s growth rate.

The negative impact of specialization is counter‐intuitive. Combes (2000: 341) found a similar result for France and noted that “explanations of the negative effect of specialization can hardly be found in the agglomeration forces presented above.” Combes and Gobillion (2015) summarize the literature estimating the effects of specialization on productivity (rather than employment growth) as finding positive effects of specialization but note that for employment negative effects have been found. This result is thus surprising but not unusual.

Competition is also estimated to have a negative effect on employment growth across all regressions, but this result is less surprising. Combes and Gobillion (2015) note that more competition can have negative effects if it lowers the prices of the products sold by firms, which is a dispersive force and leads firms to locate away from areas of higher competition. The negative, large and statistically significant effect of average firm size shown in Table 6 indicates that industry‐ districts with smaller average firm size grew faster. This result was also found by Glaeser et al (1992) and Combes (2000). Combes (2000) interprets this as the absence of internal economies of scale, though he is cautious about this conclusion since he did not estimate a production function. Glaeser et al (2010) interpret this as part of the benefits of entrepreneurship since smaller firms are assumed to be newer and more entrepreneurial.

The final agglomeration force we can examine is the extent of human capital externalities. Human capital in our analysis is measured by the proportion of skilled production workers in each industry‐ district. Across all regressions there does not seem to be any evidence of human capital externalities.

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