Scale Economies and Cities

This paper summarizes the policy-relevant insights of a generation of research on scale economies. Scale economies in production are of three types: internal economies associated with large plants, localization economies that come from sharing of inputs and infrastructure and from greater competition among firms, and urbanization economies that are generated through diversity and knowledge spillovers. The benefits (and costs) of localization and urbanization are together called “external (dis) economies” because they arise due to factors outside any single household, farm or firm. The empirical literature yields some stylized facts. Internal scale economies are low in light industries and high in heavy industries. External scale economies are amplified by economic density and dissipate with distance from places where economic activity is concentrated. Scale economies are most visibly manifest in towns and cities. To simplify somewhat, towns allow firms and farms to exploit internal scale economies, medium-sized cities help firms in an industry exploit localization economies, and large cities and metropolises provide urbanization economies to those who locate within or nearby. Scale economies have implications for policy makers. The first is that because urban settlements rise and thrive because market agents demand their services, they should be seen as creatures of the market, not creations of the state. The second is that because settlements of different sizes provide differing services, towns, cities, and metropolises are more often complements for one another, not substitutes. Third, as a corollary, policymakers should aim to improve the functioning of urban settlements, and not become preoccupied with their size.

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Bibliographic Details
Main Authors: Gill, Indermit S., Goh, Chor-Ching
Format: Journal Article biblioteca
Published: World Bank 2010-08-02
Subjects:accounting, banks, city size, economics, employment, externalities, fixed costs, housing, insurance, land use, large cities, mass transit, metropolitan areas, natural resources, productivity, savings, transport, urban growth, urbanization, wages,
Online Access:http://hdl.handle.net/10986/4440
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spelling dig-okr-1098644402021-04-23T14:02:17Z Scale Economies and Cities Gill, Indermit S. Goh, Chor-Ching accounting banks city size economics employment externalities fixed costs housing insurance land use large cities mass transit metropolitan areas natural resources productivity savings transport urban growth urbanization wages This paper summarizes the policy-relevant insights of a generation of research on scale economies. Scale economies in production are of three types: internal economies associated with large plants, localization economies that come from sharing of inputs and infrastructure and from greater competition among firms, and urbanization economies that are generated through diversity and knowledge spillovers. The benefits (and costs) of localization and urbanization are together called “external (dis) economies” because they arise due to factors outside any single household, farm or firm. The empirical literature yields some stylized facts. Internal scale economies are low in light industries and high in heavy industries. External scale economies are amplified by economic density and dissipate with distance from places where economic activity is concentrated. Scale economies are most visibly manifest in towns and cities. To simplify somewhat, towns allow firms and farms to exploit internal scale economies, medium-sized cities help firms in an industry exploit localization economies, and large cities and metropolises provide urbanization economies to those who locate within or nearby. Scale economies have implications for policy makers. The first is that because urban settlements rise and thrive because market agents demand their services, they should be seen as creatures of the market, not creations of the state. The second is that because settlements of different sizes provide differing services, towns, cities, and metropolises are more often complements for one another, not substitutes. Third, as a corollary, policymakers should aim to improve the functioning of urban settlements, and not become preoccupied with their size. 2012-03-30T07:12:35Z 2012-03-30T07:12:35Z 2010-08-02 Journal Article World Bank Research Observer 1564-6971 http://hdl.handle.net/10986/4440 CC BY-NC-ND 3.0 IGO http://creativecommons.org/licenses/by-nc-nd/3.0/igo/ World Bank World Bank Journal Article Latin America & Caribbean East Asia and Pacific United States France
institution Banco Mundial
collection DSpace
country Estados Unidos
countrycode US
component Bibliográfico
access En linea
databasecode dig-okr
tag biblioteca
region America del Norte
libraryname Biblioteca del Banco Mundial
topic accounting
banks
city size
economics
employment
externalities
fixed costs
housing
insurance
land use
large cities
mass transit
metropolitan areas
natural resources
productivity
savings
transport
urban growth
urbanization
wages
accounting
banks
city size
economics
employment
externalities
fixed costs
housing
insurance
land use
large cities
mass transit
metropolitan areas
natural resources
productivity
savings
transport
urban growth
urbanization
wages
spellingShingle accounting
banks
city size
economics
employment
externalities
fixed costs
housing
insurance
land use
large cities
mass transit
metropolitan areas
natural resources
productivity
savings
transport
urban growth
urbanization
wages
accounting
banks
city size
economics
employment
externalities
fixed costs
housing
insurance
land use
large cities
mass transit
metropolitan areas
natural resources
productivity
savings
transport
urban growth
urbanization
wages
Gill, Indermit S.
Goh, Chor-Ching
Scale Economies and Cities
description This paper summarizes the policy-relevant insights of a generation of research on scale economies. Scale economies in production are of three types: internal economies associated with large plants, localization economies that come from sharing of inputs and infrastructure and from greater competition among firms, and urbanization economies that are generated through diversity and knowledge spillovers. The benefits (and costs) of localization and urbanization are together called “external (dis) economies” because they arise due to factors outside any single household, farm or firm. The empirical literature yields some stylized facts. Internal scale economies are low in light industries and high in heavy industries. External scale economies are amplified by economic density and dissipate with distance from places where economic activity is concentrated. Scale economies are most visibly manifest in towns and cities. To simplify somewhat, towns allow firms and farms to exploit internal scale economies, medium-sized cities help firms in an industry exploit localization economies, and large cities and metropolises provide urbanization economies to those who locate within or nearby. Scale economies have implications for policy makers. The first is that because urban settlements rise and thrive because market agents demand their services, they should be seen as creatures of the market, not creations of the state. The second is that because settlements of different sizes provide differing services, towns, cities, and metropolises are more often complements for one another, not substitutes. Third, as a corollary, policymakers should aim to improve the functioning of urban settlements, and not become preoccupied with their size.
format Journal Article
topic_facet accounting
banks
city size
economics
employment
externalities
fixed costs
housing
insurance
land use
large cities
mass transit
metropolitan areas
natural resources
productivity
savings
transport
urban growth
urbanization
wages
author Gill, Indermit S.
Goh, Chor-Ching
author_facet Gill, Indermit S.
Goh, Chor-Ching
author_sort Gill, Indermit S.
title Scale Economies and Cities
title_short Scale Economies and Cities
title_full Scale Economies and Cities
title_fullStr Scale Economies and Cities
title_full_unstemmed Scale Economies and Cities
title_sort scale economies and cities
publisher World Bank
publishDate 2010-08-02
url http://hdl.handle.net/10986/4440
work_keys_str_mv AT gillindermits scaleeconomiesandcities
AT gohchorching scaleeconomiesandcities
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