1. Jason Tam

2.  Cluster of firms
 Productivity gains
 Lower transport cost
 Studies by Kawashima (1975) , Sveikauskas
(1975), Segal (1976), Forgarty and Garofalo
(1978) and Moomaw (1981, 1985)
 Positive effect of city size on labour
productivity levels

3.  Industries found higher density areas more
productive than lower density areas. Why?
 Allowed workers to develop skills over time
 Wages increase
 More incentive

4.  Higher education levels & better amenities
 First class medical facilities
 Sporting facilities
 Good public transport system
 Better roads
 Good schools, universities

5.  Knowledge spillover effect (Porter 1990)
 An exchange of ideas among individuals
 Stimulates growth in specialised and geographically
concentrated industries
 Local competition good for agglomeration economy
 Innovation!
 Maximised in cities where industries are centralised
and geographically specialised and competitive

6.  Traffic congestions
 Loss of productivity
 Eg. Los Angeles & Beijing

7.  Spillover effect
 When a government makes decisions to the benefit
of its own city but causes a negative externality to a
neighbouring city
 Emeryville, California

8.  Pollution
 Air, Water, Ground
 Developing countries
 Health issues

9.  Agglomeration is a natural phenomena &
unavoidable
 Often viewed as successful because advantages
outweigh disadvantages
 In my view, for agglomerations to work:
 People allowed to reap full benefits of advantages
 Government to manage negative externalities
 Beneficial to economy of agglomeration