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Nursery Cities: Urban Diversity, Process Innovation and the Life-Cycle of Products
TL;DR: In this paper, a simple model of process innovation is proposed, where firms learn about their ideal production process by making prototypes and switch to mass-production and relocate to specialised cities with lower costs.
Abstract: A simple model of process innovation is proposed, where firms learn about their ideal production process by making prototypes. We build around this a dynamic general equilibrium model, and derive conditions under which diversified and specialised cities coexist. New products are developed in diversified cities, trying processes borrowed from different activities. On finding their ideal process, firms switch to mass-production and relocate to specialised cities with lower costs. When in equilibrium, this configuration welfare-dominates those with only diversified or only specialised cities. We find strong evidence of this relocation pattern in establishment relocations across French employment areas 1993u1996.
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TL;DR: In this paper, the theoretical micro-foundations of urban agglomeration economies are studied, based on sharing, matching, and learning mechanisms, and a handbook chapter is presented.
Abstract: This handbook chapter studies the theoretical micro-foundations of urban agglomeration economies. We distinguish three types of micro-foundations, based on sharing, matching, and learning mechanisms. For each of these three categories, we develop one or more core models in detail and discuss the literature in relation to those models. This allows us to give a precise characterisation of some of the main theoretical underpinnings of urban agglomeration economies, to discuss modelling issues that arise when working with these tools, and to compare different sources of agglomeration economies in terms of the aggregate urban outcomes they produce as well as in terms of their normative implications.
2,032 citations
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TL;DR: In this article, the authors consider the empirical literature on the nature and sources of urban increasing returns, also known as agglomeration economies, and show that the effects of aggoglomeration extend over at least three different dimensions.
Abstract: This paper considers the empirical literature on the nature and sources of urban increasing returns, also known as agglomeration economies. An important aspect of these externalities that has not been previously emphasized is that the effects of agglomeration extend over at least three different dimensions. These are the industrial, geographic, and temporal scope of economic agglomeration economies. In each case, the literature suggests that agglomeration economies attenuate with distance. Recently, the literature has also begun to provide evidence on the microfoundations of external economies of scale. The best known of these sources are those attributed to Marshall (1920): labor market pooling, input sharing, and knowledge spillovers. Evidence to date supports the presence of all three of these forces. In addition, there is also evidence that natural advantage, home market effects, consumption opportunities, and rent-seeking all contribute to agglomeration.
2,004 citations
Cites background or result from "Nursery Cities: Urban Diversity, Pr..."
...specialization. This result is parallel to Duranton and Puga (2001a) , who use French data to...
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...This result is parallel to Duranton and Puga (2001a), who use French data to show that while new industries evolve in diverse cities, they move to specialized ones after reaching maturity....
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...In fact, Duranton and Puga (2001a) note that specialized cities are attractive for mature industries....
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...A recent paper by Duranton and Puga (2001b) also makes some progress in this direction....
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Posted Content•
TL;DR: In this article, the authors estimate plant level production functions that include variables that allow for two types of scale externalities which plants experie nce in their local industrial environments: externalities from other plants in the same industry locally, usually called localization economies or, in a dynamic context, Marshall, Arrow, Romer [MAR] economies.
Abstract: In this paper, using panel data, I estimate plant level production functions that include variables that allow for two types of scale externalities which plants experie nce in their local industrial environments. First are externalities from other plants in the same industry locally, usually called localization economies or, in a dynamic context, Marshall, Arrow, Romer [MAR] economies. Second are externalities from the scale or diversity of local economic activity outside the own industry involving some type of cross- fertilization, usually called urbanization economies or, in a dynamic context, Jacobs economies. Estimating production functions for plants in high tech industries and in capital goods, or machinery industries, I find that local own industry scale externalities, as measured specifically by the count of other own industry plants locally, have strong productivity effects in high tech but not machinery industries. I find evidence that single plant firms both benefit more from and generate greater external benefits than corporate plants. On timing, I find evidence that high tech single plant firms benefit from the scale of past own industry activity, as well as current activity. I find no evidence of urbanization economies from the diversity of local economic activity outside the own industry and limited evidence of urbanization economies from the overall scale of local economic activity.
1,080 citations
Posted Content•
01 Jan 2009
TL;DR: In this paper, the authors analyzed the economic evolution of 70 Swedish regions during the period 1969-2002 using detailed plant-level data and found that the long-term evolution of the economic landscape in Sweden is subject to strong path dependencies.
Abstract: The question of how new regional growth paths emerge has been raised by many leading economic geographers. From an evolutionary perspective, there are strong reasons to believe that regions are most likely to branch into industries that are technologically related to the preexisting industries in the region. Employing a new indicator of technological relatedness between manufacturing industries, we analyze the economic evolution of 70 Swedish regions during the period 1969-2002 using detailed plant-level data. Our analyses show that the long-term evolution of the economic landscape in Sweden is subject to strong path dependencies. Industries that were technologically related to pre-existing industries in a region had a higher probability to enter the region, as compared to unrelated industries. And unrelated industries had a higher probability to exit the region. Moreover, we found that industrial profiles of Swedish regions showed a high degree of technological coherence. Despite substantial structural change, this coherence was very persistent over time. Our methodology also proved useful when focusing on the economic evolution of one particular region. Our analysis showed that the Linkˆping region increased its industrial coherence during 30 years, due to the entry of industries that were closely related to its regional portfolio on the one hand, and the exit of industries that were technologically peripheral to its regional portfolio on the other hand. In sum, we find systematic evidence that the rise and fall of industries is strongly conditioned by industrial relatedness at the regional level.
850 citations
Cites background from "Nursery Cities: Urban Diversity, Pr..."
...Duranton and Puga (2001), in their nursery cities concept, formalized the idea that the agglomeration benefits that firms draw from their local environment depend on the firms’ maturity....
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TL;DR: For example, this article argued that research on cities is different from research on countries, and that work on places within countries needs to consider population, income, and housing prices simultaneously.
Abstract: *Empirical research on cities starts with a spatial equilibrium condition: workers and fi rms are assumed to be indifferent across space. This condition implies that research on cities is different from research on countries, and that work on places within countries needs to consider population, income, and housing prices simultaneously. Housing supply elasticity will determine whether urban success reveals itself in the form of more people or higher incomes. Urban economists generally accept the existence of agglomeration economies, which exist when productivity rises with density, but estimating the magnitude of those economies is diffi cult. Some manufacturing fi rms cluster to reduce the costs of moving goods, but this force no longer appears to be important in driving urban success. Instead, modern cities are far more dependent on the role that density can play in speeding the fl ow of ideas. Finally, urban economics has some insights to offer related topics such as growth theory, national income accounts, public economics, and housing prices. (JEL R11, R23, R31, R32)
837 citations
References
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Book•
01 Jan 1890
TL;DR: In this article, the authors present a survey of the general relations of demand, supply, and value in terms of land, labour, capital, and industrial organization, with an emphasis on the fertility of land.
Abstract: BOOK I: PRELIMINARY SURVEY 1. Introduction 2. The Substance of Economics 3. Economic Generalizations or Laws 4. The Order and Aims of Economic Studies BOOK II: SOME FUNDAMENTAL NOTIONS 1. Introductory 2. Wealth 3. Production, Consumption, Labour, Necessaries 4. Income. Capital. BOOK III: ON WANTS AND THEIR SATISFACTION 1. Introductory 2. Wants in Relation to Activities 3. Gradations of consumers' demand 4. The elasticity of wants 5. Choice between different uses of the same thing. Immediate and deferred uses. 6. Value and utility BOOK IV: THE AGENTS OF PRODUCTION. LAND, LABOUR, CAPITAL AND ORGANIZATION T 1. Introductory 2. The Fertility of Land 3. The Fertility of Land, continued. The Tendency to Diminishing Return. 4. The Growth of Population 5. The Health and Strength of the Population 6. Industrial Training. 7. The Growth of Wealth 8. Industrial Organization 9. Industrial Organization, continued. Division of Labour. The Influence of Machinery 10. Industrial Organization, continued. The Concentration of the Specialized Industries in Particular Localities. 11. Industrial Organization, continued. Production on a Large Scale 12. Industrial Organization, continued. Business Management. 13. Conclusion. Correlation of the Tendencies to Increasing and to Diminishing Return BOOK V: GENERAL RELATIONS OF DEMAND, SUPPLY, AND VALUE 1. Introductory. On Markets. 2. Temporary Equilibrium of Demand and Supply 3. Equilibrium of Normal Demand and Supply 4. The Investment and Distribution of Resources 5. Equilibrium of Normal Demand and Supply, continued, with reference to long and short periods 6. Joint and Composite Demand. Joint and Composite Supply 7. Prime and total cost in relation to joint products. Cost of marketing. Insurance against risk. Cost of Reproduction. 8. Marginal costs in relation to values. General Principles. 9. Marginal costs in relation to values. General Principles, continued 10. Marginal costs in relation to agricultural values 11. Marginal costs in relation to urban values 12. Equilibrium of normal demand and supply, continued, with reference to the law of increasing return 13. Theory of changes of normal demand and supply, in relation to the doctrine of maximum satisfaction 14. The theory of monopolies 15. Summary of the general theory of equilibrium of demand and supply BOOK VI: THE DISTRIBUTION OF THE NATIONAL INCOME 1. Preliminary survey of distribution 2. Preliminary survey of distribution, continued 3. Earnings of labour 4. Earnings of labour, continued 5. Earnings of labour, continued 6. Interest of capital 7. Profits of capital and business power 8. Profits of capital and business power, continued 9. Rent of land 10. Land tenure 11. General view of distribution 12. General influences of progress on value 13. Progress in relation to standards of life
11,519 citations
4,922 citations
"Nursery Cities: Urban Diversity, Pr..." refers background in this paper
...Glaeser, 1997), and do not merely reflect comparative advantage (Ellison and Glaeser, 1999). Instead, such patterns appear to be to a large extent the result of economic interactions taking place both within and across sectors (Henderson, 1997a). To assess the relative advantages of diversity and specialization, Glaeser et al. (1992) examine the evolution of urban employment patterns in U....
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Book•
01 Jan 1969
TL;DR: In this article, the authors studied the economy of cities and the main social problems that humanity has and the greatest source of creativity, innovation and development opportunities to solve those problems, which is relevant for a number of reasons: first of all, because most of the planet's population is grouped in them.
Abstract: Studying the economy of cities is relevant for a number of reasons. First of all, because most of the planet's population is grouped in them. Secondly, because they concentrate the main social problems that humanity has and, finally, because they are also the greatest source of creativity, innovation and development opportunities to solve those problems. Cities group companies and people who interact with each other both within their scope and with their peers in other cities. The general framework in which the current economy operates is, in general, the city and if the latter does not create the conditions for the economic activity to be sustainable, not only the city, but the country itself will suffer the consequences.
4,610 citations
"Nursery Cities: Urban Diversity, Pr..." refers background in this paper
...(JEL R30, O31, D83) A key issue in urban development, as highlighted by the writings of Jane Jacobs (1969), is the role that diversified metropolitan areas play in fostering innovation....
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...Jacobs, Jane....
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Posted Content•
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TL;DR: In this paper, the authors used a new data set on the growth of large industries in 170 U.S. cities between 1956 and 1987 and found that local competition and urban variety, but not regional specialization, encourage employment growth in industries.
Abstract: Recent theories of economic growth, including Romer (1986), Porter (1989) and Jacobs (1969), have stressed the role of technological spillovers in generating growth. Because such knowledge spillovers are particularly effective in cities, where communication between people is more extensive, data on the growth of industries in different cities allows us to test some of these theories. Using a new data set on the growth of large industries in 170 U.S. cities between 1956 and 1987, we find that local competition and urban variety, but not regional specialization, encourage employment growth in industries. The evidence suggests that important knowledge spillovers might be between, rather than within industries, consistent with the theories of Jacobs (1969).
4,223 citations
TL;DR: In this article, the authors consider the effect of the composition of economic activity on innovation and test whether the specialization of economic activities within a narrow concentrated set of activities is more conducive to knowledge spillovers or if diversity, by bringing together complementary activities, better promotes innovation.
1,834 citations