Efficiency wages,agglomeration, and a developing dual economy

In analyzing the implications of rural-urban migration in the presence of efficiency wages and external economies of scale in the urban sector, this paper focuses on structural transformation of a developing dual economy. It compares the agglomeration effects in the urban sector under exogenous wage distortion with that under exogenous wage distortion and external economies of scale and also with the agglomeration under efficiency wages and external economies of scale. It shows that because of the employment enhancing effect of rural-urban migration with efficiency wages, the agglomeration economies are bigger with efficiency wages than with minimum wage distortion in the Harris-Todaro model. In exploiting the existing external economies of scale, this agglomeration reduces the sectoral wage differential, and changes the effects of factor accumulation and commodity price changes in a way that is different from the effects under migration with exogenous wage distortion.Received: February 2003/Accepted: October 2003     

Computable urban economic model incorporated with economies of scale for urban agglomeration simulation

Urban agglomeration has attracted attentions of urban planners, economists, and policymakers. For the sake of urban agglomeration simulation, this paper attempts to develop a computable urban economic (CUE) model incorporated with economies of scale, through the approach of new economic geography. It is assumed that each firm produces a product variant in a monopolistic competition market, and the number of firms is explicit and determined endogenously. The Dixit–Stiglitz type utility function with product variety is adopted into the households’ behavior to reflect consumers’ preference for variety. On the other hand, internal increasing returns to scale and fixed cost are introduced in firms’ behavior to extend the model with economies of scale. The model’s parameter estimations and calibration are conducted on the basis of empirical data from several approved sources for Changzhou in 2008. Numerical computations are implemented by employing the extended CUE model incorporated with economies of scale to explain and examine how the urban agglomeration comes into being. Simulation results show that the extended model incorporated with economies of scale is able to commendably represent the urban agglomeration mechanism, providing a promising simulation tool for urban planning and policymaking.     

Can agglomeration economics explain why people are leaving large cities?

The authors discuss Tregarthen's response to Vining and Kontuly (see 43: Title 2179) regarding the relationship between out-migration from large cities and the advantages of agglomeration economies. In the present paper, Tregarthen's views are evaluated and the limitations of his explanation discussed. The authors present a general equilibrium model that incorporates urban agglomeration economies to examine the conditions under which out-migration and these economies might exist simultaneously     

US regional population growth 2000–2010: Natural amenities or urban agglomeration?

Using a spatial hedonic growth model, this paper empirically assesses the roles of natural amenities and urban agglomeration economies in US regional growth patterns from 2000 to 2010. Natural amenities and urban agglomeration are measured using the USDA Economic Research Service county classification codes. The general finding is that natural amenities and urban agglomeration both influenced regional growth. Yet, the natural amenity ranking is estimated to be positively related to increased productivity over the period rather than increased attractiveness to households. Urban agglomeration is positively related to increased amenity attractiveness to households. Within census regions, household natural amenity demand played a stronger role in non‐metropolitan areas.     

Urban spatial structure,agglomeration economies,and economic growth in Barcelona: An intra‐metropolitan perspective*

This paper presents an intra‐metropolitan approach to analyse the impact of urban spatial structure on local economic growth. Focusing on the Barcelona metropolitan region (BMR) between 1986 and 2001, we estimate a municipal employment growth model in which dynamic agglomeration economies related to urban spatial structure are considered using distance to employment centres, to assess metropolitan effects, and distance‐weighted variables, to measure neighbourhood effects. The results obtained show the existence of neighbourhood specialization economies and metropolitan urbanization‐localization economies fostering local growth. All of this leads to the paper's main conclusion: urban spatial structure is important for economic growth in an intra‐metropolitan context.     

The simulation of a proposed nonlinear dynamic urban growth model

This paper develops a model which contains agglomeration economies, time variable and is based on both demand-side and supply side considerations and microeconomic foundations. The simulation result indicates that the proposed model can dynamically describe both monocentric and polycentric evolution of urban growth depending on different given conditions. The model also captures the features of decentralization of population and dispersal of economic activities from the central cities to the suburbs.     

The evolution of regional multi-pole growth

Regional multi-pole growth is an important spatial form of regional economic organization pattern. We construct a model of regional multi-pole growth evolution to study its mechanism based on the assumption of heterogeneous space and inseparability of the economic subject. The study concludes that the evolution of regional multi-pole growth is affected by factors such as transportation costs, economies of scale, the crowding-out effect, and the factor endowments of superior location and inferior location. Based on the condition that the factor endowment of a location remains the same, with an increased economy of scale effect and a decline in the marginal production cost advantage, location will strengthen the agglomeration layout, which does not help form regional multi-pole growth patterns. With an increase of the crowding-out effect and a decline in the marginal production cost disadvantage, location will strengthen the dispersed layout, which fosters the formation of the regional multi-pole growth pattern. When transportation costs are high, a decline in such costs strengthens the links among locations, fostering the evolution of the regional spatial organization form to shift from dispersion to agglomeration. However, when transportation costs are somewhat reduced, their further reduction leads the regional spatial organization pattern into dispersion. Therefore, under certain conditions and with a decline in transportation costs, regional multi-pole growth weakens first and then strengthens.     

Economies of scope and economies of agglomeration: The Goldstein-Gronberg contribution revisited

Following on from the work of Goldstein and Gronberg, it is argued that under certain conditions, internal economies of scope form the bases for two types of agglomeration economy. These differ from two better known types, which are based on internal and external economies of scale. A further two types of agglomeration economy are shown to derive from particular forms of external economy. Attention is then given to the conditions under which economies of scope may be accompanied by either agglomeration economies or agglomeration diseconomies, both internal to the firm. The discussion is extended to the setting of a simple urban system, where agglomeration economies and diseconomies internal to the firm may each exist alongside agglomeration economies or diseconomies deriving from externalities. A scheme is then outlined, in which the various types of agglomeration economy are drawn together within a common framework.The author is grateful to G. Pryce and M. Slivka for their comments on an earlier version of this paper.     

Local urban growth controls and regional economic growth

Local land use regulations have been adopted to restrict population growth and urban sprawl in an attempt to prevent future problems like congestion, pollution, and loss of open space. However, when regulations become widespread in a region, it can be difficult for young workers and newcomers to find appropriate housing in the region. Because local governments may neglect the effects of their policies on the rest of the region, the resulting population size can be inefficient. We show that local adoption of housing regulations tends to over-restrict population growth when there are strong agglomeration economies in the regional production. On the other hand, when there is congestion in production, coordination among jurisdictions is undesirable if business interests are neglected.     

Development aspects of migration in third world settings: a simulation,with implications for urbanization

A simulation of the interrelationships between development and migration in developing countries is presented. "Development is represented as the diffusion of demographic transition, employment opportunities, and formal and communication channels, which in turn affect informal communications and the overall economic base. The simulation falls within the genre of neoclassical development models, but, unlike many, explicitly explores the long-run aspects of landscape evolution." The results generally "conform with expectations hypothesized in earlier research, including phenomena such as polarization reversal, converging regional disparities, and low-level equilibrium traps at small remote places where continual resource drain thwarts the agglomeration economies necessary for sustained growth. [The authors] also find that the initial urban system configuration has little effect on the final configuration, and that only urban size diseconomies are likely to alter significantly the size, spatial distribution, and spatial characteristics of the urban system."     

Understanding urban sub-centers with heterogeneity in agglomeration economies—Where do emerging commercial establishments locate?

This paper investigates the formation of employment sub-centers from a new perspective of heterogeneity in agglomeration economies. Using highly granular commercial and residential land-use data (2001–2011) in Chicago, we measure how the locations of jobs, population, quality-of-life amenities, and transportation networks shape specific and heterogenous sub-centers. First, the results suggest that the CBD as it was traditionally defined is no longer the primary source of agglomeration externalities for the new economic sectors; sub-centers with sector-specific positive agglomeration externalities have stronger correlations with new commercial establishments. Secondly, residents appear to give the highest weight to quality-of-life amenities in choosing where to live. Both trends imply dis-incentives for CBD agglomeration. These findings connect the heterogeneous production theories with land use planning and urban design, through new empirical insights into how urban sub-centers grow. Furthermore, we put forward a method for forecasting of future sub-center growth through measuring changes in the probability of commercial development, and discuss its practical implications for planning and design in Chicago.     

Effects of dynamic and spatial externalities on local growth: Evidence from Brazil

This paper analyses the impact of economic externalities on the local growth emphasizing the industrial, geographic, and temporal scope of agglomeration economies. Thus, we estimated a spatial dynamic panel model using GMM associated with the use of data at different levels of sectoral aggregation. Estimation takes into account the endogeneity of agglomeration economies. Our database consists of 558 Brazilian regions for 1995–2015. The main results suggest that while externalities act in a local dimension they also have a regional scale. These externalities are determined by their temporal trajectory. The effects of agglomeration economies on local growth are sensitive to the choice of sectoral aggregation. Local growth exhibits positive specialization effects and negative diversity effects. However, greater industrial diversity of neighbouring regions has a positive impact on local growth.     

Determinants of journeys to work in central London, 1954–93

In this paper we analyze a unique data set compiled by London Transport since 1953, concerning the number of people working in the London CBD. We consider whether the marked changes over time in employment are attributable to changes in government policy, industrial structure, macroeconomic changes, transport costs or agglomeration economies. Using cointegration methods we conclude that macroeconomic developments are quantitatively the most important factor, although transport costs have significant effects. Government decentralization policy appears to have had little effect, although our results are consistent with the presence of agglomeration economies.     

The social profitability of rural roads in a small open economy: Do urban agglomeration economies matter?

The effects of a rural roads programme depend on labour mobility, how the programme is financed, and agglomeration economies. If financed by a rural poll tax and cross-price effects and agglomeration economies are sufficiently small, the wage will rise, with some return migration. Taxes on trade act as countervailing distortions, yielding urban households some relief. Rural-urban commuting promotes the exploitation of agglomeration economies; taxes on international trade are then inferior to a poll tax. The change in the value, at producer prices, of the rural sector's net supply vector can be a poor measure of the programme's social profitability.     

Regional policy from a supra-regional perspective

The issue of the interplay between the two objectives of equity and efficiency for national policy-makers in charge of regional policy is becoming topical once again in regional economics. This paper first reviews this issue theoretically and looks at recent literature contributions to show that, although many advances have been made, little attention has been paid to the effects of regional structural differences on the trade-off between the two objectives. Then, to demonstrate that differences between the regions of which a country is composed may influence the results of the models, a new simple short-run two-country four-region model is introduced to study the trade-off (differentiating for different regional productivity and different strengths of agglomeration economies—which are innovatively modelled on the demand side). In this short-term model, the national policy-maker can affect entrepreneurship through the set-up costs of firms. Similarly to the traditional literature, for countries composed of identical regions, spatially dispersed allocations of public support to production are more efficient with low agglomeration economies whereas spatially concentrated allocations are more efficient with high agglomeration economies. As the regions become different, however, unbalanced allocations of public support to the most advanced region become more efficient even in the case of relatively weak agglomeration economies, until, when regions are sufficiently different, the most efficient allocation of public support to production is always concentrated in the most advanced territories. If some sort of compensating mechanisms were available, in the short-run the policy-makers could decide to support the competitiveness of the already more-productive regions and transfer income to the lagging ones. All these issues are studied with reference to southern Italy (“Mezzogiorno”) and eastern Germany (former DDR) in order to show not only the similarities with the model’s predictions but also the many differences, resulting from the far greater complexity of actual development processes. Discussions and comments from an anonymous referee, Marco Alderighi, Roberto Camagni, Roberta Capello and Andrés Rodríguez-Pose are gratefully acknowledged.     

THE IMPACT OF CHANGING BUSINESS AGGLOMERATION ECONOMIES ON METROPOLITAN GROWTH

ABSTRACT This paper aims to determine the impact of changes in the parameters measuring economies of scale in production on metropolitan growth. The degree of spatial concentration of sectoral economic activity and patterns of trade between two metropolitan areas are explained with a two-sector model borrowed from the international trade literature. It is shown that sectoral production will become more concentrated as the importance of intrasectoral economics of scale relative to intersectoral scale economics increases. An increase in the relative size of intrasectoral business agglomeration economics will not necessarily lead to complete specialisation by either metropolitan area.     

Capital cities: When do they stop growing?

This article is an attempt to explain a capital city's size. We assume away explanations such as exploitation of the capital city's hinterland. Instead, we emphasise the role of the localisation of government activity (i.e., administration or legislation) in the capital city for both the capital city economy and the hinterland economy. We assume in the model that larger regions benefit from agglomeration economies. We discuss the interaction of those agglomeration economies with an agglomeration diseconomy specific to the capital city. Under certain conditions, a stable population distribution between the capital city and its hinterland emerges where neither region captures the entire population. We also analyse the comparative statics properties of this stable equilibrium. Received: 6 June 2000 / Accepted: 27 November 2000     

Strangers in our midst: the usefulness of exploring polycentricity

The existence and persistence of cities provide prima facie evidence of agglomeration economies, but do little to inform our understanding of the specific nature of forces that induce the concentration of economic activity, nor the spatial scale at which they occur. Though the theoretical literature on conceptualizes these forces without specific geographic scale, the empirical literature largely treats them as working mainly at the metropolitan level. We argue that agglomeration may work at different spatial scales. There is now extensive evidence that metropolitan areas are polycentric, with a significant portion of employment clustered in employment centers outside the CBD. This provides basic evidence of net agglomeration benefits at the sub-metropolitan level. We explore theories of agglomeration and consider how they may explain the presence, location, characteristics, and growth of employment centers. We illustrate the usefulness of exploring polycentricity with a case study of the Los Angeles region. Our understanding of agglomeration economies can be enriched by investigating the nature of employment centers and the forces that produce and sustain them.     

Regional determinants of total factor productivity in Japan: stochastic frontier analysis

As Japan’s birthrate declines and its society ages, governmental policies need to improve the productivity of regional economies in order to sustain regional growth. This study examines social overhead capital and population agglomeration as drivers of total factor productivity (TFP) growth in Japan. The use of stochastic frontier analysis demonstrates that social overhead capital contributes to TFP growth and, especially, influences productive efficiency. Furthermore, the findings reveal that population agglomeration underpins TFP growth in regional economies. Empirical results also indicate that productive efficiency is high in regions where manufacturing is concentrated and that productive efficiency improves when internationally competitive manufacturers concentrate in regional economies. This study endorses the development of social overhead capital to spur Japan’s regional TFP growth. As such, it indicates that providing social infrastructure and enhancing regional productivity are important strategies for the government to consider in its efforts to achieve sustainable regional growth.