Enhancing Productivity in UK Core Cities by OECD

Author:OECD
Language: eng
Format: epub
Tags: governance/regions
Publisher: OECD Publishing
Published: 2020-03-03T00:00:00+00:00

Agglomeration economies

Another determinant of the productivity differences across cities is the agglomeration economies, the productivity gains that arise due to interactions between workers or firms that take place locally. Economist Alfred Marshall (1890[23]) was among the first to emphasise that the agglomeration of people and firms can increase productivity. In basic terms, agglomeration economies imply that a given worker in a given job will be more productive if he or she does the job in a large city rather than in a rural area.2 Thus, agglomeration economies are distinct from the productivity gains described above that occur because cities are home to higher-skilled workers and more productive industries.

Since the work by Marshall, considerable effort has been spent on identifying the mechanisms through which agglomeration economies emerge. While not all aspects related to the emergence of agglomeration economies are fully understood, three main mechanisms have been identified (see Box 2.3 for details). First, infrastructure and other inputs in the production process are more effectively shared among many users in cities than in rural areas. Second, because of the larger number of firms and workers in cities, workers are able to find jobs that are a better match for the skills that they possess. Third, innovations are generated and spread around at a faster pace in cities than in rural areas.

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.