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From Sectoral To Functional Urban Specialisation

  • Gilles Duranton
  • Diego Puga

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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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0511.

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Date of creation: Sep 2001
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Handle: RePEc:cep:cepdps:dp0511
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