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This paper analyses the influence of agglomeration and spatial sorting on wages in Brazilian cities. The empirical strategy is based on a two‐step estimation. The first step estimates a wage equation with the observed characteristics of workers and firms and location effects. The second step decomposes the location effects into employment density and fixed effects of firm and worker. We estimate an urban wage premium for a developing country with the simultaneous inclusion of worker and firm fixed effects, instrumental variables, and nighttime lights. We find agglomeration effects of 4.3–5.7%, which are larger than those obtained for developed countries. [ABSTRACT FROM AUTHOR]

This is the first study that uses multilevel modelling to analyse regional influence on the decision to invest in innovation activities of firms in a single developing country, Ecuador. Our results indicate that the decision to invest in R&D and in other innovation activities are conditioned by the region in which the firm is located. Regional loan volume, orientation towards knowledge exploitation and intra‐regional‐sectorial R&D spillovers are positively associated with both types of innovation activities, while regional levels of co‐operation and inter‐regional R&D spillovers are only positively associated with the probability of investing in other innovation activities. [ABSTRACT FROM AUTHOR]