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Transaction Costs, Agglomeration Economies, and Industrial Location

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  • GAVIN A. WOOD
  • JOHN B. PARR
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    Abstract

    Following an outline of the different types of agglomeration economy, consideration is given to transaction costs. Transaction costs may have a definite spatial dimension because institutional, commercial, cultural, and language characteristics are differentiated across the geographic space separating market agents. The concept of transaction space is introduced to represent the spatial differentiation of these characteristics, and this concept is used to cast light on how space can contribute to coordination and agency problems that raise transaction costs. Contractual agreements that are rearranged, so as to span a less heterogeneous transaction space, permit the reduction of transaction costs. Agglomeration can then be interpreted as an alternative to hierarchical structures within firms in economizing on transaction costs. The paper concludes with illustrations of how this framework may help to understand the spatial implications of corporate restructuring and new information technologies. Copyright 2005 Blackwell Publishing Ltd..

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    Bibliographic Info

    Article provided by Gatton College of Business and Economics, University of Kentucky in its journal Growth and Change.

    Volume (Year): 36 (2005)
    Issue (Month): 1 ()
    Pages: 1-15

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    Handle: RePEc:bla:growch:v:36:y:2005:i:1:p:1-15

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    Web page: http://www.blackwellpublishing.com/journal.asp?ref=0017-4815

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    Cited by:
    1. Kristin Kronenberg & Kati Volgmann, 2014. "Knowledge-intensive employment change in the Dutch Randstad and the German Rhine-Ruhr area: comparable patterns of growth and decline in two metropolitan regions?," Jahrbuch für Regionalwissenschaft, Springer, vol. 34(1), pages 39-60, February.
    2. Quiggin, John, 2006. "Cities, connections and cronyism," Risk and Sustainable Management Group Working Papers 151513, University of Queensland, School of Economics.
    3. Giulio Cainelli & Donato Iacobucci, 2011. "Agglomeration, related variety and vertical integration," Openloc Working Papers 1104, Public policies and local development.
    4. Quiggin, John, 2005. "Localisation, globalisation and finance," Risk and Sustainable Management Group Working Papers 151510, University of Queensland, School of Economics.
    5. Glaeser, Edward Ludwig & Laibson, David I. & Scheinkman, Jose A. & Soutter, Christine L., 2000. "Measuring Trust," Scholarly Articles 4481497, Harvard University Department of Economics.
    6. Mark Drabenstott, 2005. "A review of the federal role in regional economic development," Monograph, Federal Reserve Bank of Kansas City, number 2005arotfrire, December.
    7. Taedong Lee & Susan Meene, 2012. "Who teaches and who learns? Policy learning through the C40 cities climate network," Policy Sciences, Springer, vol. 45(3), pages 199-220, September.

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