Presentation by Ana Maria Bonomi Barufi, NEREUS, University of São Paulo, Brazil Advanced Brainstorm Carrefour (ABC): ‘Smart People in Smart Cities’ Matej Bel University, Banská Bystrica, Slovakia (August, 2016)

1. High-tech services to companies in the city: the
rise of the modern economy in Brazil
Ana Maria Bonomi Barufi
NEREUS – University of São Paulo, Brazil
Smart People in Smart Cities
Banská Bystrica
August 28-30, 2016

2. Industry-Space: the dynamics of industrial development
• R1: agriculture share in GDP is high
• R2: urbanization requires industrial
development, as well as services for final
consumption
• R3: breaking the middle income trap –
diversification in the demand from families for
services, and industrial development demands
new types of services – increase industrial
density, decreases manufacture/GDP, increase
in commercial services/GDP.
• R4: more advanced industrial development –
increased industrial density and more
commercial services, while industry/GDP
decreases even more. Industry invests on
innovations in the service sector (IoT, big data,
cloud computing, etc.) - Helper et al. (2012)
Industrial share in GPD (%) – D1
IndustrialDensity–D2
CommercialservicesshareinGDP–D3
R1 R2
R3R4
Source: Arbache (2012)

3. Employment by sector, Brazil, 1950-2010
-
5,000
10,000
15,000
20,000
25,000
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
WRTEMP TRAEMP FIREEMP GOVEMP OTHEMP
-
5,000
10,000
15,000
20,000
25,000
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
AGREMP MINEMP MANEMP PUEMP CONEMP

4. % Employment by sector, Brazil, 1950-2010
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
s_AGREMP s_MINEMP s_MANEMP s_PUEMP s_CONEMP
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
s_WRTEMP s_TRAEMP s_FIREEMP s_GOVEMP s_OTHEMP

5. • Services may reduce costs and/or add value to manufacturing
• Services in Brazil have one of the highest shares in the economy in the developing world
– close to developed economies, but with a different composition
Development paths

6. • New economic organization: services which increase value added are concentrated in
developed economies – global value chain
• Protection in developing economies against imports – international debates
• Production and assembling are being moved to developing economies
• Developing strategy: focus on services that add value
Development paths
Innovation
Development, production, distribution, and support
Valueadded
R&D
Design
Logistics
Rawmaterials
Production
Assembly
Logistics
Branding
Marketingand
distribution
Post-sale
support
Industrial
value chain

7. • Opportunity-motivated entrepreneurship tends to flourish in urban regions with
high levels of economic growth and diversity of economic activities (Bosma and
Sternberg, 2014)
• High growth firms tend to be favoured by different factors than firms in general
(Li et al., 2015)
• ICT firms co-locate and benefit from knowledge spillovers (Lasch et al., 2011)
Empirical Literature

8. Data
• RAIS database
• Demographic Census
• REGIC areas
• Main variables
• Industry mix firm growth
• Urbanization
• Education
• Unemployment
• Density
• Sector composition
• Region
Long time lags to avoid endogeneity (still may be an issue)
Sectors:
• IT
• information services
• management consultancy
• arquitecture and engineering
• R&D
• marketing
• other professional activities

9. Representativeness of the database
9.2%
24.1% 26.4%
39.4%
56.8% 58.2%
66.1%
11.8%
32.1% 32.5%
53.5%
64.3% 66.5%
76.4%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Agriculture Construction Services -
cost - final
Services -
value - firms
Services -
cost -
companies
Manufacture Other
industrial
activities
Título do Gráfico
2006
2014
Percentage of workers with a signed booklet – formal job
New firms – effect is partially from the formalization
and partially from new companies
In 2014, the number of jobs related to the supply of
services that add value to companies represented
around 3% of the total labour force
1.0%
1.2%
1.4%
1.6%
1.8%
2.0%
2.2%
50,000
55,000
60,000
65,000
70,000
75,000
80,000
85,000
2006 2007 2008 2009 2010 2011 2012 2013 2014
Firms % in total firms
Firms in the sector of intermediate services with added
value

10. Characteristics of the sector, 2014
Firms in intermediate services that add
value employ more educated workers
3.1%
5.3%
9.5%
14.5%
21.3%
25.3%
38.4%
0.0% 10.0% 20.0% 30.0% 40.0% 50.0%
Agriculture
Construction
Manufacture
Services - cost - companies
Other industrial activities
Services - cost - final
Services - value - firms
% with bachelor

11. Characteristics of the sector, 2014
Firms in intermediate services that add
value are concentrated in denser areas
Density groups
(workers per km2)
REGIC areas Total firms Agriculture Construction Manufacture
Other
industrial
activities
Services -
cost - final
Services -
cost - firms
Services -
value -
firms
Less than 1 93 181,717 35,752 8,007 11,185 597 96,505 27,537 2,134
1 to less than 2 70 153,923 29,996 6,658 9,418 611 85,800 20,028 1,412
2 to less than 5 91 359,103 64,953 19,564 24,439 1,214 189,515 54,727 4,691
5 to less than 10 75 348,883 50,343 20,259 28,836 1,157 190,798 53,676 3,814
10 to less than 20 82 614,660 65,000 39,847 63,163 1,628 326,361 108,592 10,069
20 to less than 50 45 642,643 43,948 43,751 67,608 1,095 349,360 125,218 11,663
50 or more 26 1,545,350 27,352 92,667 138,529 2,203 825,698 411,482 47,419
Total 3,846,279 317,344 230,753 343,178 8,505 2,064,037 801,260 81,202
Less than 1 4.7% 11.3% 3.5% 3.3% 7.0% 4.7% 3.4% 2.6%
1 to less than 2 4.0% 9.5% 2.9% 2.7% 7.2% 4.2% 2.5% 1.7%
2 to less than 5 9.3% 20.5% 8.5% 7.1% 14.3% 9.2% 6.8% 5.8%
5 to less than 10 9.1% 15.9% 8.8% 8.4% 13.6% 9.2% 6.7% 4.7%
10 to less than 20 16.0% 20.5% 17.3% 18.4% 19.1% 15.8% 13.6% 12.4%
20 to less than 50 16.7% 13.8% 19.0% 19.7% 12.9% 16.9% 15.6% 14.4%
50 or more 40.2% 8.6% 40.2% 40.4% 25.9% 40.0% 51.4% 58.4%

12. Characteristics of the
sector, 2014

13. Characteristics of the sector, 2014
Firms in intermediate services that add
value are concentrated in denser areas

14. Constant 0.288*** 0.623 5.985*** 0.598 -2.966** 2.127
Unemployment rate 2000 0.352 4.035** 3.606** 1.905 -4.256 -4.613
% Bachelor (25 or more) 2000 2.048*** 18.155*** 15.868*** 5.298*** 30.979*** 24.488***
% Urban population 2000 -0.183 0.656 0.665 -1.152** 3.290** 4.120**
% Firms of interm. services value added 2006 21.018*** 101.270*** 62.787*** 28.483*** 113.083*** 77.206***
% Firms in manufacturing 2006 0.187 2.728** 1.945* 0.884 2.979 1.659
% Firms in other services 2006 -0.004 -0.400 -0.522 0.032 3.832** 3.137**
Density (formal employment 2005)
Less than 1 (reference)
1 to less than 2 0.069** 0.397** 0.234*
2 to less than 5 0.067** 0.496*** 0.363***
5 to less than 10 0.138*** 0.611*** 0.382**
10 to less than 20 0.165*** 0.739*** 0.473** 0.000 0.000 0.000
20 to less than 50 0.268*** 0.575* 0.246 0.054 -0.577** -0.608**
50 or more 0.409*** 1.286*** 0.944*** 0.110 -0.622* -0.629*
Macro-region dummies Yes Yes Yes Yes Yes Yes
N 482 471 471 101 101 101
Adj R-squared 0.641 0.662 0.586 0.651 0.768 0.690
Only REGIC with density >= 10
LQ
services
value
added
Firms
value
added
All firms
LQ
services
value
added
Firms
value
added
All firmsPreliminary results

15. Results
• Many firms locate in state capitals
• Firms locate in places with originally better conditions for productivity
• Denser places
• Education and pre-existing firms attract them more

16. Future steps
• Narrow down to the firm level – relocation, new firms, employment
growth
• Within the city – what are the additional impacts of this sector? Are
there effects in productivity at the neighbourhood?

17. Thank you ;)