Chapter

Urbanization, Agglomeration, and Coagglomeration of Service Industries

Edited by Jed Kolko

in Agglomeration Economics

Published by University of Chicago Press

Published in print April 2010 | ISBN: 9780226297897
Published online February 2013 | e-ISBN: 9780226297927 | DOI: http://dx.doi.org/10.7208/chicago/9780226297927.003.0006
Urbanization, Agglomeration, and Coagglomeration of Service Industries

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The economic future of cities depends on services, and understanding why services are in cities is essential to understanding the function of cities in modern economies. Service industries that rely more on information technology are even less likely to colocate at the state level, which suggests that the Internet substitutes for phone, mail, and travel in service industries, though not for in-person interactions. The purpose of the analysis is twofold: first, to see what, if anything, explains agglomeration and urbanization in service industries; and second, to see if similar forces explain agglomeration in both manufacturing and services. This chapter discusses whether industries that trade with each other also agglomerate together and whether trading affects coagglomeration differently for services than for manufacturing. These findings on urbanization, agglomeration, and coagglomeration reveal why services are more urbanized yet less agglomerated than manufacturing. The chapter argues that the differential effect of information technology on manufacturing and services is because electronic communication dramatically lowers the cost of transporting intangibles, especially over longer distances, but not the cost of transporting tangible goods.

Keywords: services industries; agglomeration; urbanization; trading affects; information technology

Chapter.  11806 words.  Illustrated.

Subjects: Microeconomics

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