ECONOMICS OF AGGLOMERATION

1. ECONOMICS OF
AGGLOMERATION
Department of Architecture
Land economics
Guided By , Prepared By ,
Dr. Jayant Kumar Miral B. Kaloliya
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2.  Most important economies of scale for urban economics is
called Agglomeration
 An agglomeration economy exists when production is cheaper
because more activity is going on nearby
 Two types of agglomeration economies:
 Localization Economies
 Economies of scale that arise from have many firms in the same industry
locate near one another
 Urbanization Economies
 Economies of scale that arise from having many people located together,
regardless of the industry in which they work.
WHAT IS AGGLOMERATION?
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3. Localization Economies
 The benefit from the concentration of same-industry firms in a city (economies of
scale external to a firm but internal to an industry)
 Fro example iron and steel industry can be establish with the Engineering , ship and
car making.
Iron and
steel plant
Engineering
Ship
building
Car making
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4.  The benefit from the concentration of different-industry firms in a
city (economies of scale external to an industry but internal to a city)
Urbanization Economies
Interdependent
Chemical plant
Textile
industry
Electronics
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5.  What are intermediate inputs?
 Things used to make other things – Screens used to make
Televisions, Engines used for Cars.
 There are economies of scale associated with having all these
‘intermediate inputs’ located nearby.
 It is cheaper to make TVs when the screens don’t have to be shipped
long distances (ex of Localization Economies)
INTERMEDIATE INPUT
ECONOMIES OF SCALE
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6.  Benefits from the concentration of workers (employment)
in cities. Such benefits increase workers’ productivity and
therefore wages
 Labor market localization economies: Benefits from
concentration of workers in the same industry (occupation) in a
city.
 Labor market urbanization economies: Benefits from
concentration of workers in different industries (occupations) in
a city.
LABOR MARKET AGGLOMERATION
ECONOMIES
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7.  Positive impact on manufacturing, transport, storage, and
communication, and other services sectors, in varying magnitudes.
POSITIVE OF AGGLOMERATION
Inter-plant transport saving
Access to common pool of skilled labor
Presence of special training institutions
Presence of ancillary services
Research and development of collective facilities
Sharing cost of certain operation
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8. (1) Agriculture
(2) Fishing
(3) Mining and Querying
(4) Manufacturing Registered
(5) Manufacturing Unregistered
(6) Construction;
(7) Electricity, Gas, and Water supply
(8) Railways
(9) Transport, Storage, Communication
(10) Trade, hotels, and restaurants
(11) Banking and insurance
(12) Real estate, ownership of dwellings, and business services
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POSITIVE IMPACT SECTOR

9.  Are some negative consequences associated with clustering:
 Congestion
 Pollution
 Disease
 Crime
 High Rents
NEGATIVE IMPACT
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10. Indian city are some example of the Agglomeration of Economic
 Surat – Gujarat (Diamond and Textile Industry),
 Morbi – Gujarat (Ceramic Industry),
 Namakkal – Karnataka (Transportation Industry)
 Tripur – Karnataka (Knitwear Industry)
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EXAMPLE OF AGGLOMERATION

11.  Bhagat, R B. 2003. Urbanization in India: a Demographic
Reappraisal. International Union for Scientific Study of Population,
p.p.1-17.
 Bostic, R. 1997. Urban productivity and factor growth in the late
19th century. Journal of Urban Economics, 4, p.p. 38-55.
 Carlino, G.A. 1979. Increasing Returns to Scale in Metropolitan
Manufacturing. Journal of Regional Science, 19, p.p. 363-374.
 Ciccone, A. & R. Hall. 1996. Productivity and the density of
economic activity. American Economic Review, 86, p.p. 54-70.
REFERENCES
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12. Thank you
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