MIT11_481Js09_lec05

MIT11_481Js09_lec05 - MIT OpenCourseWare http:/ocw.mit.edu...

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MIT OpenCourseWare http://ocw.mit.edu 11.481J / 1.284J / ESD.192J Analyzing and Accounting for Regional Economic Growth Spring 2009 For information about citing these materials or our Terms of Use, visit: http://ocw.mit.edu/terms .
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MIT 11.481J, 1.284J, ESD.192J Karen R. Polenske B. AGGLOMERATION ECONOMIES AND ECONOMIES OF SCOPE 1. Internal economies (diseconomies), also called scale economies: these accrue to a given firm in the internal production of a given facility as its scale of output increases. As output expands, economic theorists show that the average cost of production first declines and then generally begins to rise beyond a given level of output. 2. External economies (diseconomies): "Externalities are variously known as external effects, external economies and diseconomies, spillovers, and neighborhood effects . . . [they] involve an interdependence of utility and/or production functions." The Dictionary of Modern Economics , p. 148. a. Localization economies (diseconomies): these accrue to all firms in a single industry at a single location. b. Urbanization economies (diseconomies): these accrue to all activities at a single location as the size (population, output, income, and wealth) of the area increases. Isard also refers to them as economies of urban concentration. c. Spatial-Juxtaposition economies (diseconomies): scale-economies (other than size) factors, such as quality-control, training, and social-welfare economies (diseconomies), that result when an industrial complex is located at only one site. For additional details on these agglomeration economy concepts, refer to Walter Isard, 1975, Introduction to Regional Science , Englewood Cliffs, NJ: Prentice-Hall, Inc., pp. 113-117. Internal and external economies (diseconomies) are referred to jointly as agglomeration economies. The agglomeration and deglomeration that occurs as cities (regions) change lead to “ the concentration and deconcentration or dispersal of industrial and other activity ” (Isard, 1975, p. 113). 3. Economies of scope: economies that accrue by distributing some of the firm's fixed costs over a number of related product lines. According to Lazonick (p. 230), "How many scope economies any one product division contributes to the company's cost performance depends on the extent of the market for its product--which, like the economies of scale that it achieves on the basis of its own divisional assets, in turn, depends on its ability to plan and coordinate its specialized division of labor." For additional details, see William Lazonick, 1991, Business Orientation and the Myth of the Market Economy , Cambridge, England: Cambridge University Press, and Alfred D. Chandler, Jr., 1990, Scale and Scope: The Dynamics of Industrial Capitalism , Cambridge, MA: The Belknap Press of Harvard University Press.
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MIT 11.481J, 1.284J, ESD.192J Karen R. Polenske 4. Dispersal Economies (diseconomies): these occur to a firm as it interchanges with its various suppliers and customers along an external local or global supply
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This note was uploaded on 12/06/2011 for the course ESD 11.481j taught by Professor Karenr.polenske during the Spring '09 term at MIT.

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MIT11_481Js09_lec05 - MIT OpenCourseWare http:/ocw.mit.edu...

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