Agglomeration Economies

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Agglomeration Economies
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Definition of Agglomeration

• Agglomeration - The grouping of industrial or
  productive activities close to one another in
  order to create cost advantages, as in the
  creation of an industrial park or area of a city
  given over to industry.

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Definition of Agglomeration Economies

• Agglomeration economies savings or benefits
  companies get by clustering together. Frequently
  associated with the everybody using the
  infrastructure of transportation, communications
  facilities and other services

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• Agglomeration effects
• Advantages due to locating near other industries
• Cost savings
• Maintenance easier
• Good transportation links
• Economies of scale Economies of scale   occur
  when mass production of a good (product) results
  in a lower average cost for each item.

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Figure 7.15 Localization economies
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Definition of De-agglomeration

• De-agglomeration is a de-concentration due to
  technological change or increased costs of
  continued clustering. This occurs when too many
  activities, perhaps of the wrong type, are too
  close together.  Traffic congestion, pollution,
  labor shortages, capital shortages, supply
  shortages caused by local demand, increased land
  prices , and a general decay of infrastructure
  because of the intense use of the infrastructure
  made by all the industries can cause some
  enterprises to move out of the traditional
  centers. Think about failed industrial parks, or
  failed outlet malls.