Agglomeration Economies

Definition of Agglomeration Agglomeration - The grouping of industrial or productive activities close to one another in order to create cost advantages, as in the creation of an industrial park or area of a city given over to industry.

Definition of Agglomeration Economies Agglomeration economies: savings or benefits companies get by clustering together. Frequently associated with the everybody using the infrastructure of transportation, communications facilities and other services

Agglomeration effects Advantages due to locating near other industries Cost savings Maintenance easier Good transportation links Economies of scale: Economies of scale   occur when mass production of a good (product) results in a lower average cost for each item.

Figure 7.15 Localization economies Major and independent recording companies provide a good example of localization economies, whereby external economies and economic linkages have been established around a particular industry: recording studios for popular music, in this case.

Definition of De-agglomeration De-agglomeration is a de-concentration due to technological change or increased costs of continued clustering. This occurs when too many activities, perhaps of the wrong type, are too close together.  Traffic congestion, pollution, labor shortages, capital shortages, supply shortages caused by local demand, increased land prices , and a general decay of infrastructure because of the intense use of the infrastructure made by all the industries can cause some enterprises to move out of the traditional centers. Think about failed industrial parks, or failed outlet malls.