Urban Agglomeration

Urban agglomeration is the spatial concentration of economic activity in cities. It can also take the form of concentration in industry clusters or in employment centres within a city. One reason that agglomeration takes place is that there exist external increasing returns, also known as agglomeration economies. Evidence indicates that there exist both urbanization economies, associated with city size, and localization economies, associated with the clustering of industry. Both effects attenuate geographically. Theoretical research has identified many sources of agglomeration economies, including labour market pooling, input sharing, and knowledge spillovers. Empirical research has offered evidence consistent with each of these.