Agglomeration: Economic and Environmental Impacts

Urbanization is taking place at an unprecedented pace and scale in China, India, and many other emerging economies. This will have profound impacts on the world economy and environment. This review provides a critical assessment of the current understanding of the intertwined relationships between agglomeration, economic growth, and environmental quality. We start by providing a brief overview of the extensive literature on the drivers of agglomeration and its economic impact. We then discuss the opposing views on the environmental impact of agglomeration and illustrate the trade-offs involved when choosing among different levels and forms of agglomeration. Finally, we discuss challenges for environmental management in a rapidly urbanizing economy and some lessons learned from history and experiences of urban development and their policy implications. The review concludes with a discussion of key knowledge gaps and future research directions.