Agglomeration economies and evolving urban form

Abstract

Agglomeration economies are a fundamental explanation for the existence of cities. Spatial clustering allows for a variety of external benefits such as labor pooling, sharing of suppliers, and specialization; these in turn contribute to increased productivity and economic growth. Over the past several decades, the strength and nature of agglomeration economies have come into question. In the 1980s, it was argued that information and telecommunications technology reduced the need for physical proximity, and hence the value of agglomeration economies. Reduced agglomeration economies would explain the decentralization of economic activity and decline of central cities. We are now fully in the era of the information economy, with smart phones, cars, buildings, and appliances merging into the Internet of Things. At the same time, we observe the re-emergence of some downtowns and the continued growth of megalopolises around the USA, despite rising congestion. This essay traces the role and nature of agglomeration economies in the evolution of urban form.