Question

What are agglomeration economics? What are the sources of Agglomeration economies (ie economic models of AE)? What role do they play in urban economics? What empirical evidence is there of A.E.?

Answer 1

Agglomeration economies are the benefits that come when firms and people locate near one another together in cities and industrial clusters.

1. Good supply networks
2. Supply of trained workers
3. Infrastructure built specifically for the industry
4. Good transport links.

Due to agglomeration economies, people and firms often concentrate in particular areas. For example, people tend to move to cities where is there is greater choice of jobs, social activities and specialist services

China has seen a strong growth in manufacturing industries on the south-east coast. These areas have good transport links for exporting to the rest of the world. Also, the areas have attracted migrant flows from northern China, enabling wage costs to remain low.