Abstract
Agglomeration economies affect urban economic outcomes. We analyze variation in sports team productivity and localization of teams across divisions and cities in Campeonato Paulista an annual football competition in S & atilde;o Paulo, Brazil, exploiting plausibly exogenous variation in localization generated by a promotion and relegation system in this league. Results show that urbanization, proxied by population, and localization affects short and long run team productivity. These results provide new evidence on the importance of localization economies in the urban economy in developing countries and shed light on why sports teams in larger cities enjoy more success than those in smaller cities.