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 ?
At the low range, the economic cost of unrealized agglomeration economies are $0.
2009: A meta-analysis of estimates of urban agglomeration economies.
In sum, at the onset of World War II most of America's great industrial firms which, thanks to agglomeration economies were concentrated in cities throughout the East and upper Midwest--now faced labor cartels.
In particular, one economy, namely Australia, exhibits both relatively larger agglomeration economies and also a larger home-market effect than the relatively smaller economy, New Zealand.
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.
Simply, economic activity clusters in space (as is evident within cities and regionally both intra- and inter-nationally) and this suggests that agglomeration economies persist in this era of the Internet, teleconferencing and the like.
They also suggest that government activities and announcements can serve as valuable coordination tools in the presence of agglomeration economies.
More recently, scholars of strategic management have extended the ideas underlying theories of economic geography that explain firm activities and have applied them to examine intra-country differences in the relative abundance of resources and the importance of agglomeration economies in explaining the location patterns of foreign firms (Porter 1998, Enright 1998, Nachum 2000).
2] is associated with the proportion of the capital stock operated by foreign-owned plants in local authority area r, (14) and covers all manufacturing industries to try to capture any spatial agglomeration economies.
In particular, FDI flows at the provincial level are expected to be affected by China's FDI regime, local market size, labor costs, labor quality, agglomeration economies, transportation costs, FDI incentives, and cultural links with investors.
Empirical work in general supports the hypothesis that agglomeration economies are decisive location factors (Head, Ries, and Swenson, 1995; Guimaraes, Figueiredo, and Woodward, 2000).