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.
References in periodicals archive ?
The result of these agglomeration economies is that many aspects of the current phase of globalisation can more accurately be described as 'global regionalism' (Rugman, 2005), whereby countries within the same individual super-region are becoming more closely integrated with respect to one another, relative to other countries.
However, given prior literature on optimal city size with respect to cost of living one would hardly expect a population size of 250,000 to fully realise the potential benefits of agglomeration economies as a 'medium sized' city in Pakistan will have a population far greater than 250,000.
I perform this more detailed analysis since theory and empirical evidence suggest that agglomeration economies function at a local level.
Even though previous studies have provided invaluable information on FIRE concentration, specialization and change across Canada, the potential influence of agglomeration economies on FIRE specialization has not been explicitly addressed.
Commonly, agglomeration economies are defined as decreasing average costs that accrue to individual firms located in areas that have a high concentration of activities (Hanink 1997).
They also suggest that government activities and announcements can serve as valuable coordination tools in the presence of agglomeration economies.
Agglomeration economies as well as positive external effects are theoretical concepts that are difficult to study.
Nachum (2000) demonstrates that location advantages and agglomeration economies simultaneously affect FDI location within the United States.
In particular, we find no evidence of agglomeration economies in the high-tech electronics industries (which suggests either that such effects are not present or that they are confined to a smaller number of local labour market areas than are covered here).
Agglomeration economies also appear to be quite important in spurring both entrepreneurial activity and knowledge-based industries.
The disk drive industry is a good case for testing a theory of agglomeration economies and competitive strategy, as it has experienced rapid change of location and competitive strength of its participants, and the authors argue that location strategies have been a crucial component of firm competitiveness.