1 Chorching Goh, the World Bank Athens February The Black Sea Conference Facilitating Agglomeration Economies: how governments can better serve businesses Reshaping Economic Geography

2 Outline Based on the World Development Report 2009 Reshaping Economic Geography (Chapters 1, 4, 7) A Portfolio of Places –varied size, density, and economic functions A Different Realm –Increasing returns and scale economies A Calibrated Approach –Institutions, Infrastructure, and Interventions

3 Concentration, a fact of life, Half of the world’s production…..

4 …at the global spatial scale… ….can fit onto 1.5% of its land, less than the size of Algeria

5 … at the local spatial scale Cairo produces over half of Egypt’s GDP with 0.5% of its land Bangkok generates close to half of Thailand’s GDP with < 0.1% of its land

6 …at the national spatial scale …. similarly, production concentrates in a few parts of the country This uneven economic landscape gives rise to a portfolio of places…. CanadaSweden

7 A Portfolio of Places… …characterized by Zipf’s Law and Gibrat’s Law Poland Korea Belgium

8 A Portfolio of Places: some country examples Ukraine Turkey Romania Bulgaria Greece Russia

9 A Different Realm –Internal scale economies; –localization economies; and –urbanization economies

10 Sriperumbudur – internal scale economies Internal scale economies are high in heavy industries, and low in light industries

11 Shenzhen – localization economies Firms in the same industry cluster to share information, labor, and other inputs.

12 Singapore – urbanization economies Diversity of economic activity encourages innovations

13 Different parts of a country urbanize at different pace Incipient, intermediate and advanced urbanization present different policy challenges. The challenges multiply with the level of urbanization. Incipient stage urbanization Popayan, Colombia Intermediate stage urbanization Bucaramanga, Colombia Advanced stage urbanization Bogota, Colombia Orange areas denote urban settlements—Popayan, Bucaramanga, and Bogota

14 As urbanization advances, the functions of cities change … and they deliver different types of scale economies Popayan, Colombia Bucaramanga, Colombia Bogota, Colombia

15 The Goal Increase economic density or Facilitate agglomeration economies

16 Facilitate Agglomeration Economies –Areas at incipient stage --- Towns facilitate internal scale economies (e.g., mill, factory) which come from large plant size –Areas at intermediate stage --- Medium cities facilitate localization economies, that arise from input-sharing and close competition among firms within the industry –Areas at advanced stage --- Large cities facilitate urbanization economies which come from industrial diversity that fosters innovation

17 A Calibrated Approach:

18 Areas at incipient urbanization stage: Density

19 … about facilitating Density, building spatially blind Institutions

20 Examples of land market institutions: Land tenure security, private property rights: England 16 th century: enclosure movement in 1500; Enclosure Act 1604 Denmark 18 th century: Abolition of “villenage”: 1760 communal to private land holding USA 19 th century: 1862 Homestead Act – the foundation of strong property rights Cambodia 20 th century: land tenure security; land registry; land administration, conflict resolution; Ease of land use conversion; versatile zoning law: London: 18 th --19 th century: Land Enquiry Commission; 1832 Reform Acts; Land valuation decrees; The Housing of the Working Classes Act 1890 and Cheap Trains for London Workers Bill 1890 NYC: 19 th - 20 th century: 1916 zoning resolution; 1938 City Planning Commission; 1961 zoning law. Hong Kong 20 th century: 1935 Housing Commission and Town Planning Ordinance (amended overtime); 1963 first land-use strategy “Zoning Plan;” USA, 1930s-40s: Wagner-Steagall Housing Act of 1937, good intra-urban public transport systems Sweden, 1960s-70s: Royal Housing Commission in 1945; Million Homes Programme Korea, 1980s-90s: universal provision of basic amenities; property rights; and subsidized credit for slum dwellers to become home owners Costa Rica, 1990s: housing subsidies

21 Spatially blind Institutions –Universal provision of basic amenities and social services (e.g., water and sanitation, street and security, school and clinics) –land market institutions (e.g., secure property rights, secure land tenure, versatile land use conversion rule, flexible land regulation, responsive zoning laws, functioning land registry, land administration, conflict resolution systems…)

22 Areas at intermediate urbanization stage: Density + Distance In addition to providing institutions to continue building density, infrastructure is necessary to reduce distance due to congestion

23 …promote Density & reduce Distance strengthen Institutions & invest in Infrastructure

24 Spatially blind Institutions and Spatially connective Infrastructure London: 18 th --19 th century: Land valuation decrees; underground; The Housing of the Working Classes Act 1890 and Cheap Trains for London Workers Bill 1890 NYC: 19 th - 20 th century: 1916 zoning resolution; 1938 City Planning Commission; 1961 zoning law. Hong Kong 1930s-80s: 1935 Housing Commission and Town Planning Ordinance (amended overtime); 1963 first land-use strategy “Zoning Plan;” Bangkok 2000s: zoning and parking spaces; traffic demand controls

25 Areas at advanced urbanization stage: Density + Distance + Division

26 …promote Density, reduce Distance, eliminate Division …strengthen Institutions, provide Infrastructure, target Interventions Nangok Slums in Seoul: 1995 vs Cheoggyecheon riverbank slums in Seoul: 1955 vs When Institutions and Infrastructure are adequate, only then Interventions will succeed

27 Spatially blind Institutions + Spatially connective Infrastructure + Spatially targeted Interventions London, 19 th century: flexible zoning law, ease of conversion rules, expansive transport infrastructure, affordable housing in the periphery of London NYC, 19 th - 20 th century: responsive and flexible zoning rules which evolve with the needs of market, integrated transport networks of rail and underground and busways. Hong Kong,1930s-80s: responsive land market institutions --- evolving Town Planning Ordinances (amended overtime) – to transport and housing needs Singapore, 1960s-80s: strong land market institutions (e.g., responsive zoning laws as reflected in rising floor-area ratios) and well-connected and expanding transport links. Sweden, 1960s-70s: Royal Housing Commission in 1945; Million Homes Programme USA, 1930s-40s: Wagner-Steagall Housing Act of 1937, good intra- urban public transport systems Korea, 1980s-90s: universal provision of basic amenities; property rights; and subsidized credit for slum dwellers to become home owners

28 A Calibrated Approach: An “I” for a “D”