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From Sectoral to Functional Urban Specialization

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Author Info
Duranton, Gilles
Puga, Diego

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Abstract

We document and then develop a model explaining and relating changes in firms’ organization and in urban structure. Sharing of business services by headquarters and of sector-specific intermediates by production plants within a city reduces costs, while congestion increases with city size. A fall in the costs of remote management leads to a shift in urban structure, from a configuration where cities specialize by sector and host integrated headquarters and production plants, to a configuration where cities specialize by function, with headquarters from different sectors and business services clustered in a few large cities and production plants from each sector clustered in smaller separate cities.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2971.

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Date of creation: Sep 2001
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Handle: RePEc:cpr:ceprdp:2971

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Related research
Keywords: business services cities functional specialization headquarters

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Find related papers by JEL classification:
L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
R12 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
R30 - Urban, Rural, and Regional Economics - - Production Analysis and Firm Location - - - General

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