ABSTRACT
An economic reason to expect a “diffusion of benefits” from focused police attention is due to “agglomeration economies.” This chapter outlines the theory of agglomeration economies as they apply to retail and criminal activities. Agglomeration economies refer to the benefits of locating near similar facilities; benefits derived from factors that are external to the unit. In the case of illegal drug dealers, the question turns on whether forces of competition or agglomeration economies dominate. The fact that high levels of violence surround drug dealing areas seems to be counter-theoretical to the agglomeration economies framework. There are several reasons why illegal drug dealers may cluster in space in addition to agglomeration economies. The effect of agglomeration economies is tested using a spatial lag term. A surprising finding is that in Philadelphia, major streets are negatively related to drug-sales arrests as these arrests are denser with increasing distance from these streets.
