However, competition in clusters can exert significant negative effects on formal and manufacturing firms and prevent them from reaping the benefits of agglomeration economies
often touted in developed countries.
redistribution and that agglomeration economies
are likely the reason
Agglomeration-enhancing investments in larger areas where agglomeration economies
are potentially larger will prove more economically worthwhile than in less populous regions.
Under-populated prime cities in transition countries fail to capitalize on the agglomeration economies
to a full extent.
Historically, economists relied on agglomeration economies
to explain how the high concentrations of people and jobs in cities led to efficiency gains and cost savings for firms.
Related to the theoretical developments, if for two decades NEG focused on the macro-heterogeneity of locations, showing how this can be generated endogenously by the decisions taken at micro-economic level by individuals and identical companies, the specialists (Octtaviano, 2011) show that the future research should analyze more deeply the micro-heterogeneity of individuals and companies, throwing a light upon how interactions between the two levels of heterogeneity affect the existence and intensity of the agglomeration economies
The theory of agglomeration economies
inter-relates market conditions.
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.
As we will see below, the nature and scale of spatial transactions costs have changed radically, and the evidence regarding the contemporary role of agglomeration economies
in driving productivity growth is now so overwhelming that it is more or less beyond question (Venables, 2006).
It is generally believed that cost of living tends to first fall as city size increases due to emergence of agglomeration economies
but as population increases diseconomies of scale and negative externalities like traffic congestion, high land rents and pollution set in that exceed the potential agglomeration economies
In this paper, I use firm-level data and focus on potentially important supply side variables: tax rates and agglomeration economies
in manufacturing industries: The case of Spain.