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Agglomeration economies have a heterogeneous impact on growth and development, which has been confirmed in the literature. Thus, the aim of this paper is to find precise relatedness between these externalities and the performance of regions. Structural models reveal that impact depends on development level. Both urbanisation and localisation economies are beneficial in different circumstances, but they play a greater role in developed regions. In less developed regions, growth rate is only correlated with regional urbanisation economies, including low-technology and less knowledge-intensive services, but mostly with the share of manufacturing sectors. Nevertheless, regions with higher GDP per capita have a lower share of industry sectors and a higher share of knowledge-intensive services (KIS), but also higher localisation economies within both technology-intensive and KIS market services. Therefore, there is a dichotomy in the less developed regions. Although they need urbanisation economies and a high share of industries for growth, specialised KIS and knowledge-intensive activities become crucial afterwards, when they are mature. Less developed regions are moving in the direction of the development models of more developed regions. Developed regions, in turn, can follow two types of development paths (or these paths could mutually interfere), with positive correlations of localisation and urbanisation economies with both development level and growth. One path requires a high share of high-tech sectors and knowledge-intensive activities, with urbanisation economies within manufacturing and service sectors. The second path is inverse because it requires a lower share of manufacturing sectors and a higher share of KIS and knowledge-intensive activities with localisation economies throughout all sectors, including medium-low and low-technology and service sectors.
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