Agglomeration Economies Versus Urban Diseconomies: The Case of the Greater Metropolitan Area (GMA) of Costa Rica

Abstract

The process of agglomeration economies proceeds in increasing manner, indirectly affecting productive activities such as education, public services, transportation and all of its linked components. Nevertheless, there is a limit to this accumulative process where the gains from economies of scales are reversed and this is related to the accumulation of decreasing costs in the areas of agglomeration. These costs include price of factors (i.e., commuting) with scarcer factors (land and labor); it also includes costs related to transportation (traffic, stress, crime, etc.) (Polese, 1998). Generally speaking, a city, just like any other economic resource, begins to enter a phase of decreasing returns of scale and cost of essential urban services like transportation, adopting an U-shaped trend, as explained in microeconomic analysis (Camagni, 2005).