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From sectoral to functional urban specialisation

  • Duranton, Gilles
  • Puga, Diego

We document and then develop a model explaining and relating changes in firms' organisation 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 specialise by sector and host integrated headquarters and production plants, to a configuration where cities specialise 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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Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 57 (2005)
Issue (Month): 2 (March)
Pages: 343-370

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Handle: RePEc:eee:juecon:v:57:y:2005:i:2:p:343-370
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