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Economies of agglomeration

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Agglomeration effects in the regional economy have advantages and disadvantages.

In the business administration, agglomeration refers to the accumulation of various companies, typically at a location (so-called location agglomeration). These agglomeration leads to agglomeration effects.

Economies of agglomeration applies in the study of commerce, in particular the land evaluation with agglomeration effects of the stationary deals retail. From an operational perspective is about the attractiveness, understood the appreciation of a (micro) site, which results from the spatial agglomeration of trade and service enterprises in a location as agglomeration advantage. From single operational point of view, the increase in sales is a commercial operation or business referred to as agglomeration advantage of by the proximity to shops with a similar range of results.

Regional economics

Agglomeration advantages

Benefits arise from the spatial agglomeration of physical capital, companies, consumers and workers. Specifically, this leads to agglomeration.

  • Low transport costs
  • A great (local) market
  • A large supply of labor and thus the increased chance of supply and demand for labor, particularly for specialists to compensate for fast matching, lower search costs.
  • The accumulation of knowledge and human capital leads to knowledge spillovers between firms.

Agglomeration disadvantages

The disadvantages of agglomerations are to be mentioned:

  • Strong environmental pressures
  • High land prices
  • Bottlenecks in public goods (eg poor / overburdened infrastructure)
  • Corruption
  • High competitive pressure
  • Lack of reserve areas.

Includes texts translated from Wikipedia.

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