Two agglomeration economies: conditions needed for their formation and benefits that allow them to thrive

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The concept of agglomeration in economics has always been confined to urban economies. The theory describes the advantages which firms experience when they settle in a closed regional periphery in proximity to each other…

Introduction

The concept of agglomeration in economics has always been confined to urban economies. The theory describes the advantages which firms experience when they settle in a closed regional periphery in proximity to each other. Agglomeration economies justifies the clustering of firms together by focusing on lower the cost of production resulting from easy availability of multiple suppliers and scope for specialization of labor according to their skill-set. Owing to agglomeration economies, people and firms give attention to a particular region of operation or a specific geographical region.The basic perception of agglomeration economies is facilitation of production when economic activity is clustered and such notions are developed to suffice the ultimate end of forming and developing a city. Multiple factors like types of economies formed, network connections, and the advantages and disadvantages that may result in the growth of cities.Two distinct types of agglomeration economies are operating in the global economic domain: urbanization economies and localization economies. An urbanization economy is related to city's population and level of employment along with the multiplicity of its productive constitution. On the contrary, a localization economy is associated with a city's specialization in one specific segment.According to Sassen producer services, unlike other types of services are mostly not as reliant on the proximity of the buyers as consumer services. Thus, concentration of production in suitable locations and export, both regionally and internationally are feasible. ...
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