ABSTRACT
This chapter explores how agglomeration relates to economic development. Agglomeration is a tendency for items to group together spatially or physically. In economic development, people are interested in the agglomeration propensities and observed agglomeration patterns of firms, workers, related organizations and institutions, and economic activity. Agglomeration is one of the prominent explanations for the origin of cities. Agglomeration may generate costs or disadvantages alongside benefits. Some of the most widely described and researched kinds of agglomeration costs are those that arise generally from urbanization and therefore are labelled urbanization diseconomies. Central place theory applies most neatly to the distribution of market towns of varying sizes across otherwise primarily undifferentiated regions, and the underlying agglomeration economy rationale holds best for relatively closed systems, in which localized transportation dominates. Economic developers armed with broad understandings of the sources of agglomeration economies are well-positioned to analyze their individual regions and assist companies to realize and take advantage of local agglomeration advantages.
