Localization and Urbanization Economies are two types of external economies of scale, or agglomeration economies. External economies of scale result from an increase in the productivity of an entire industry, region, or economy due to factors outside of an individual company. There are three sources of external economies of scale: input sharing, labor market pooling, and knowledge spillovers (Marshall, 1920) ' Urbanization economies arise when the size of the city leads to an increase in productivity. Los Angeles exemplifies urbanization economies in that it has no single dominant industry, yet continues to grow. Firms which locate in Los Angeles benefit from the common resources and large labor pool found in the city. Common resources such as roads, buildings and power supply benefit firms in cities regardless of their industry. Also, firms have better access to labor by locating in cities. The urban environment creates positive externalities that benefit several different industries. Jane Jacobs is often credited with the idea that urban diversity and a city’s size leads to agglomeration economies. However, Marshall’s (1920)Marshall, 1920 discussion of urban diversity predates her work.Rosenthal and Strange, 2004
LocalizUrbanization Economies are two types of external economies of scale, or agglomeration economies. External economies of scale result from an increase in the productivity of an entire industry, region, or economy due to factors outside of an individual company. There are three sources of external economies of scale: input sharing, labor market pooling, and knowledge spillovers (Marshall, 1920) ' Urbanization economies arise when the size of the city leads to an increase in productivity. Los Angeles exemplifies urbanization economies in that it has no single dominant industry, yet continues to grow. Firms which locate in Los Angeles benefit from the common resources and large labor pool found in the city. Common resources such as roads, buildings and power supply benefit firms in cities regardless of thetter access to labor by locating in cities. The urban environment creates positive externalities that benefit several different industries. Jane Jacobs is often credited with the idea that urban diversity and a city’s size leads to agglomeration economies. However, Marshall’s (1920)Marshall, 1920 discussion of urban diversity predates her work.Rosenthal and Strange, 2004
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Localization and Urbanization
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their industry. Also, firms have better
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