MIT11_481Js09_lec09a

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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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AGGLOMERATION VERSUS DISPERSAL ECONOMIES Karen R. Polenske Professor of Regional Political Economy and Planning Department of Urban Studies and Planning Massachusetts Institute of Technology Presented in 11.481J, 1.284J, ESD.192J
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HYPOTHESIS Regional economic growth can be enhanced/retarded by two types of economies of scale ¾ Agglomeration economies/diseconomies ¾ Dispersal economies/diseconomies
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AVERAGE COST CURVE FOR THE FIRM Agglomeration and Dispersal Economies/Diseconomies
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DISPERSAL ECONOMIES/DISECONOMIES A dispersal economy (diseconomy) is external to the firm,thus it moves the entire average cost curve of the firm down (up) at all output levels, although the old and the new cost curves do not have to be parallel at different scales of output .
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AGGLOMERATION ECONOMIES/ DISECONOMIES An agglomeration economy/diseconomy has the same effect on the average cost curve as a dispersal economy/diseconomy, but different factors affect it.
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TWO TYPES OF AGGLOMERATION ECONOMIES/DISECONOMIES ¾ Urbanization--agglomeration economies accruing to a firm from the many different suppliers and producers locating in a particular region, each of which takes advantage of the presence of banks, universities, labor, etc. that service diverse industries. ¾ Localization--agglomeration economies accruing when similar firms locate in one region, each of which takes advantage of the various facilities in the region (trade associations, training institutes, etc.). Hoover (1937).
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AGGLOMERATION ECONOMIES TABLE 1 Agglomeration/Dispersal Type of Agglomeration/Dispersal Concept Economies/Diseconomies and Networks __________________________________________________________ Old concepts Industrial Cluster
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