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From sectoral to functional urban specialisation

  • Gilles Duranton
  • Diego Puga

Striking evidence is presented of a previously unremarked transformation of urban structure from mainly sectoral to mainly functional specialisation. We offer an explanation showing that this transformation is inextricably interrelated with changes in firms' organisation. A greater variety of business services for headquarters and of sector-specific intermediates for production plants within a city reduces costs, while congestion increases with city size. A fall in the costs of remote management leads to a transformation of the equilibrium urban and industrial structure. Cities shift from specialising by sector -- with integrated headquarters and plants -- to specialising mainly by function -- with headquarters and business services clustered in larger cities, and plants clustered in smaller cities.

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Paper provided by University of Toronto, Department of Economics in its series Working Papers with number dpuga-01-01.

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Length: 28 pages
Date of creation: 11 Feb 2001
Date of revision:
Handle: RePEc:tor:tecipa:dpuga-01-01
Contact details of provider: Postal: 150 St. George Street, Toronto, Ontario
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