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Agglomeration Economies

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Agglomeration Economies
The net advantage of building one or more businesses in a city or other large population center. Agglomeration economies occur when the larger market, lower transportation costs, and other benefits outweigh the added expenses (such as higher rent or taxes) of living in a city. This concept is closely associated with economies of scale. See also: Diseconomies of agglomeration.


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Agglomeration Theory The theory of agglomeration economies inter-relates market conditions.
The cope-mitigate-transfer framework Even in the most hazard-prone cities, disaster risk is unlikely to reduce population growth, because the economic premium due to agglomeration economies and the amenity value of large cities dominate the location decisions of firms and people.
Auto production in the industry's early days was not exclusive to Detroit, but it became more and more concentrated there because agglomeration economies gave Detroit firms a competitive advantage: low-cost links to suppliers of raw materials and components, access to a larger and deeper pool of labor (including managers and engineers) with specialized skills, and--perhaps most important--the technological spillovers resulting from proximity to talented minds grappling with similar problems.
 
 
 
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