Chapter 49 Evidence on the nature and sources of agglomeration economies

Stuart S. Rosenthal, William C. Strange

Research output: Chapter in Book/Entry/PoemChapter

1503 Scopus citations


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.

Original languageEnglish (US)
Title of host publicationCities and Geography
Number of pages53
ISBN (Print)9780444509673
StatePublished - 2004

Publication series

NameHandbook of Regional and Urban Economics
ISSN (Print)1574-0080


  • C1
  • D2
  • O4
  • R0
  • agglomeration economies
  • external economies
  • microfoundations
  • productivity
  • urban growth

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Economics and Econometrics
  • Urban Studies


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