All lectures provided in the course Urban Economics and Real Estate. This course is given in the minor Real Estate. Which is a combined minor of the UVA and the VU, both located in Amsterdam
,If there were NO scale economies:
• Suppose there were only:
§ Constant returns to scale in production
§ Constant returns to scale in transport
§ While you observe transport and commuting flows
• Then:
§ No benefits from clustering of production factories
§ No benefits from clustering goods for transport
§ Dis-benefits from clustering in space, since this drives up land prices
§ Everybody would be self-sufficient
§ There would be no commuting (“spatial impossibility theorem”)
There are scale economies in production!
• Sources of scale economies in production:
§ Factor specialization (back to Adam Smith)
§ Indivisibility of inputs (minimum efficient scale)
• If economies of scale in production do exist:
§ Concentration, in spite of high land rents
§ Factory production may become more efficient than home production
There are scale economies in transport!
• Sources of scale economies in transport:
§ Technological change -> combine shipments
• If economies of scale in transport do exist:
§ Transport cost/ Kg/ Km/ fall if volume increases
§ Combine shipments
§ Trade and transport companies will emerge
From factory to factory town:
• Workers want to economize on commuting
§ Live close to factory
§ Location: close to (energy) inputs, driving up density and land prices -> a
factory town emerges
• This simple idea can perfectly explain why cities grow when:
§ Economies of scale become more important (machines are fixed costs)
§ Transport becomes more efficient (railways)
è Typical of cities that emerged during the industrial revolution
Trading cities:
• Workers want to economize on commuting
§ Live closely to transport firms
§ Location: ‘strategic’ or ‘central’ location -> driving up density and land prices
-> a trading city emerges
• This simple idea can perfectly explain why trading cities grow when:
, § Transport becomes more efficient (railways)
• Very long history (3000 BC)
1. Examples: Cape Town, New York, Amsterdam, etcetera
, • He defined three main sources:
1. Input- and output sharing (goods)
2. Labour market pooling (people)
3. Knowledge spillovers (ideas)
Input- and output sharing:
• Lower transportation costs of goods
§ Input sharing: a cluster will attract input suppliers
o Lower input prices due to competition
§ Output sharing: more potential customers
Labour market pooling:
• Lower transportation costs of people
§ Varying demand for labour
§ Varying supply for labour
§ Easier to find the ideal worker
o Highly educated people in Amsterdam
o Movie stars in Hollywood
o Etcetera
Knowledge spillovers:
• Lower transportation costs of ideas
§ Formal and informal exchange of information
o Labour mobility between firms
o Network events, pubs, etcetera
o Cooperation with nearby other firms
è Leading to new ideas
§ Example: Silicon Valley
Other benefits of urban size:
• Amenities (enjoyable)
§ Universities, theaters, pubs, shops, museums, etcetera
• Joint labour supply of families
§ The two workers (‘mum & dad’) may look for different industries
§ Relatively more ‘power couples’ in bigger cities
• Greater learning opportunities
§ Wider variety of visible role models
• Social opportunities
§ Greater chance of meeting others who share your interests
• Sorting of people
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller Neeson. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $6.89. You're not tied to anything after your purchase.
