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How Close Is Close? The Spatial Reach of Agglomeration Economies

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  • Stuart S. Rosenthal
  • William C. Strange

Abstract

This paper considers the attenuation of agglomeration economies. Put another way: how close is close? The paper presents evidence of agglomeration effects operating at various levels of spatial aggregation, including the regional, metropolitan, and neighborhood scales. In fact, agglomeration effects also seem to operate below the neighborhood level, including within buildings and organizations. These effects attenuate, with nearby activity exerting the strongest effects. The attenuation of agglomeration economies has implications for urban spatial structure, the microfoundations of agglomeration economies, and commercial real estate. It also affects the ability of governments and businesses to internalize agglomeration economies.

Suggested Citation

  • Stuart S. Rosenthal & William C. Strange, 2020. "How Close Is Close? The Spatial Reach of Agglomeration Economies," Journal of Economic Perspectives, American Economic Association, vol. 34(3), pages 27-49, Summer.
    • Handle: RePEc:aea:jecper:v:34:y:2020:i:3:p:27-49
    DOI: 10.1257/jep.34.3.27
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    More about this item

    JEL classification:

    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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