Place-based Development in International Economic Networks
New Horizons in Regional Science series
Chapter 4: Clustering and specialization in European regions
It would prove hard to discuss regional development without exploring the role of agglomeration economies. According to this idea, regions with a large urban population have a tangible advantage compared to less populous areas. A number of reasons have been put forward to backup this theory. In agglomerated areas, for instance, it is easier to have a good match between workers and employers, because of the wider range of possibilities provided by a larger labour market. It is also easier for a firm to purchase its inputs, as in a large populated region it would have better access to specialized suppliers (Marshall, 1890; Porter, 1990). Next, a number of authors noticed that agglomerated areas are ideal places to create, attract, accumulate and retain knowledge (Jacobs, 1969; Florida and Gates, 2001). Moreover, an enterprise can benefit from the access to a large local market. If the production technology of a sector exhibits increasing returns to scale, selling to a consistent base of local consumers may help firms to reach an efficient output size, which enables firms to compete successfully with firms in other regions (Krugman, 1991; Venables, 1996).
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