Edited by Charlie Karlsson
Chapter 2: Agglomeration Economics
Philip McCann 1 Introduction Agglomeration economics and the economics of industrial clustering have emerged over the last two decades as central issues of research into economic growth and performance. For both urban and regional economists and also economic geographers, the increased interest in these topics is obviously very welcome indeed. However, as the quantity and variety of research in this ﬁeld has burgeoned in economics, economic geography, urban planning and even sociology, the mixing, and sometimes rather liberal use, of technical terminology, has led to a certain amount of analytical overlapping, confusion and duplication. For this reason, this chapter will consider the origins and analytical foundations of diﬀerent views and hypotheses regarding the potential advantages of agglomeration, the structural assumptions underlying agglomeration and clustering, and ﬁnally the empirical challenges associated with these issues. The aim of the chapter is therefore to disentangle these various issues and to clarify the analytical foundations of agglomeration economics, as well as to outline the empirical challenges associated with these issues. In order to do this we adopt a transactions-costs framework which has been employed elsewhere. The reason is that this is the most parsimonious way of analytically disentangling these various issues from a range of diﬀerent approaches and diﬀerent analytical traditions. As we will see in this chapter, while analytically classifying diﬀerent types of agglomeration and clusters is itself diﬃcult, the empirical identiﬁcation of these is also very diﬃcult. As such, the observation and measurement of agglomerations...
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