Akbar, Couture, Duranton, and Storeygard (2021) on urban mobility has shown that traffic in developing economies is generally much slower than in developed countries,<sup>4</sup> particularly because of infrastructure deficiencies in the metropolitan areas of the developing economies. However, apart from being a direct agglomeration cost, the lack of urban mobility can also indirectly affect pure agglomeration externalities because it makes sharing, matching, and learning in cities more difficult. Mobility is key to the generation of agglomeration economies, which tend to decay strongly with travel time (Graham, 2007; Rosenthal and Strange, 2008; Graham & Melo, 2011). At the same time, the lack of mobility is a consequence of the concentration of people and economic activities and a by-product of agglomeration benefits (Duranton and Puga, 2020). Ultimately, it is unclear whether mobility issues harm some firms more than others and whether these issues are more pronounced in some parts of the developing world. Building on the agglomeration economies literature that has examined the role of transport networks and travel times (e.g., Graham, 2007; Melo et al., 2017) and using a new database of mobility indexes for 1,228 cities constructed by Akbar et al. (2021), based on more than 530 million simulated trips on Google Maps for the period between June and October 2019, we examine how firm-specific agglomeration benefits are dependent on urban “uncongested” travel speeds and congestion in the developing countries. Low uncongested travel speed or the speed in the absence of traffic originates from the lack of good infrastructure in a metropolitan area and is characterized by slow traffic during the whole day, while congestion delay is typically caused by traffic during peak travel times. Thus, both low travel speeds and congestion limit mobility within metropolitan areas and, therefore, obstruct the generation of external economies of scale (see also Collier & Venables, 2016; Venables, 2017b; Gerritse & Arribas-Bel, 2018), but congestion does so during specific parts of the business day, with a potentially bigger effect on the non-tradable sector, which unlike the tradable sector depends more heavily on the local consumer market. In our research, we find that agglomeration economies are lost both through limited uncongested mobility and through congestion, but the latter tends to have a much stronger negative effect on agglomeration economies and to harm relatively more firms in the non-tradable sectors than those producing tradables.

The findings in this paper suggest that “sterile” agglomeration economies are most likely in developing economies with congested cities and an urban enterprise sector dominated by small, inefficient, domestic-owned establishments serving the domestic market and operating in the nontradables sector. These cities – also known as consumption cities with high shares of employment in urban non-tradables (Jedwab et al., 2022) – tend to be more prevalent in developing economies

> 4 Likewise, Grover et al. (2021) find that for the average city density in their data, 19-30 percent fewer hours are spent in traffic congestion in developed countries compared to developing countries.

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