The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Urban Agglomeration

  • William C. Strange
Reference work entry


Urban agglomeration is the spatial concentration of economic activity in cities. It can also take the form of concentration in industry clusters or in employment centres within a city. One reason that agglomeration takes place is that there exist external increasing returns, also known as agglomeration economies. Evidence indicates that there exist both urbanization economies, associated with city size, and localization economies, associated with the clustering of industry. Both effects attenuate geographically. Theoretical research has identified many sources of agglomeration economies, including labour market pooling, input sharing, and knowledge spillovers. Empirical research has offered evidence consistent with each of these.


Input sharing Knowledge spillovers Labour market pooling Localization economies Migration New economic geography Production functions Productivity Rent seeking Systems of cities Urban agglomeration Urban wage premium Urbanization economies 

JEL Classification

This is a preview of subscription content, log in to check access.


  1. Ades, A., and E. Glaeser. 1995. Trade and circuses: Explaining urban giants. Quarterly Journal of Economics 110: 195–227.CrossRefGoogle Scholar
  2. Arnott, R. 1979. Optimal city size in a spatial economy. Journal of Urban Economics 61: 65–89.CrossRefGoogle Scholar
  3. Costa, D., and M. Kahn. 2001. Power couples. Quarterly Journal of Economics 116: 1287–1315.Google Scholar
  4. Duranton, G., and D. Puga. 2004. Micro-foundations of urban agglomeration economies. In Handbook of urban and regional economics, vol. 4, ed. J. Henderson and J.-F. Thisse, 2063–2118. Amsterdam: North-Holland.Google Scholar
  5. Fujita, M., and J. Thisse. 2002. The economics of agglomeration. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
  6. Fujita, M., P. Krugman, and A. Venables. 1999. The spatial economy: Cities, regions, and international trade. Cambridge: Cambridge University Press.Google Scholar
  7. Glaeser, E., and D. Mare. 2001. Cities and skills. Journal of Labor Economics 192: 316–342.CrossRefGoogle Scholar
  8. Glaeser, E., J. Kolko, and A. Saiz. 2001. Consumer city. Journal of Economic Geography 1: 27–50.CrossRefGoogle Scholar
  9. Head, K., and T. Mayer. 2004. The empirics of agglomeration and trade. In Handbook of urban and regional economics, vol. 4, ed. J. Henderson and J.-F. Thisse, 2609–2670. Amsterdam: Elsevier.Google Scholar
  10. Helsley, R., and W. Strange. 1990. Agglomeration economies and matching in a system of cities. Regional Science and Urban Economics 20: 189–212.CrossRefGoogle Scholar
  11. Helsley, R., and W. Strange. 1997. Limited developers. Canadian Journal of Economics 30: 329–348.CrossRefGoogle Scholar
  12. Henderson, J., A. Kuncoro, and M. Turner. 1995. Industrial development in cities. Journal of Political Economy 103: 1067–1085.CrossRefGoogle Scholar
  13. Holmes, T. 1999. Localization of industry and vertical disintegration. Review of Economics and Statistics 81: 314–325.CrossRefGoogle Scholar
  14. Jacobs, J. 1969. The economy of cities. New York: Vintage.Google Scholar
  15. Jaffe, A., M. Trajtenberg, and R. Henderson. 1993. Geographic localization of knowledge spillovers as evidenced by patent citations. Quarterly Journal of Economics 108: 577–598.CrossRefGoogle Scholar
  16. Kim, S. 1995. Expansion of markets and the geographic distribution of economic activities: The trends in U.S. regional manufacturing structure, 1860–1987. Quarterly Journal of Economics 110: 881–908.CrossRefGoogle Scholar
  17. Marshall, A. 1890. Principles of economics. London: Macmillan.Google Scholar
  18. Rosenthal, S., and W. Strange. 2001. The determinants of agglomeration. Journal of Urban Economics 50: 191–229.CrossRefGoogle Scholar
  19. Rosenthal, S., and W. Strange. 2003. Geography, industrial organization, and agglomeration. Review of Economics and Statistics 85: 377–393.CrossRefGoogle Scholar
  20. Rosenthal, S., and W. Strange. 2004. Evidence on the nature and sources of agglomeration economies. In Handbook of urban and regional economics, vol. 4, ed. J. Henderson and J.-F. Thisse, 2119–2172. Amsterdam: Elsevier.Google Scholar

Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • William C. Strange
    • 1
  1. 1.