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The magnitude and causes of agglomeration economies
- Share to:
: Firms and workers are much more productive in large
and dense urban environments. There is substantial evidence of
such agglomeration economies based on three aproaches. First,
on a clustering of production beyond what can be explained by
chance or comparative advantage. Second, on spatial patterns in
wages and rents. Third, on systematic variations in productivity
with the urban environment. However, more needs to be learned
about the causes of agglomeration economies. We have good
models of agglomeration through sharing and matching, but not
a deep enough understanding of learning in cities. Despite recent
progress, more work is needed to distinguish empirically
between alternative causes.