Regional Economic Geography

Duranton and Puga (2004)

Sharing, Matching, Learning mechanisms underpinning agglomeration economies.

Sharing → Indivisible inputs (like ports), specialised suppliers and labour market risk.

Matching → Greater likelihood of finding a match and higher probability of it being a better match.

Learning → Knowledge creation, transfer and diffusion.

Black and Henderson (2003)

“Sticky Urban Hierarchies” → national hierarchies remain highly stable (“sticky”) overtime despite massive macro-level changes.

Capital and labour remain immobile → economic activity is anchored to existing cores.

New Economic Geography

In contrast to RSUE, NEG suggests they outward mobility of labour and capital is limited, even when costs rise steeply, as the advantages of staying in clusters trump the gains from leaving.

Regional Science and Urban Economics

Roback’s (1982) Spatial Equilibrium Model forms the core of this framework.

The model assumes highly mobile labour and capital that “votes with its feet” by leveraging wages, housing costs and amenities and when making maximising locational choices.

Glaeser et al. (2006)

“High wages imply consumer disamenities”.

Financial Times (2023)

Britain’s economy is highly London-centric → Without London, Britain would be poorer per head than Mississippi.

Federal Reserve (2026)

Trade-able jobs make up around 20% of the economy but are responsible for over 70% of economic output.

Larson et al. (2023)

Covid reduced the proportion of complex, envelope-pushing communication within firms → This lead to a reduction in the amount of cross-pollination of ideas that usually sparks radical or disruptive innovation.

Hsieh and Moretti (2019)

Cities are not big enough!

Productive and innovative labour is being kept out of superstar cities like London due to the high costs of land and labour.

Making these cities bigger can enhance economic transformation and advancement.

Kemeny and Storper (2015)

Absolute specialisation has a positive effect on earnings whilst relative specialisation has no effect.

Kemeny and Storper (2012)

There is a positive correlation between amenities and urban size and real wage. The authors find that big cities have high enough levels of amenities to compensate for disamenities (more congestion; higher costs).

Storper and Rodriguez-Pose (2020)

In opposition to the “housing as opportunity” school of thought. Faced with prohibitive permitting and high construction costs in superstar cities like London, property developers prioritise luxurious, amenity-filled developments targeted to high-paid workers to restore profit margins.

This creates a paradox where the “housing as opportunity” school is undermined as increased supply of premium real estate accelerates and reinforces the displacement of the very workforce it was meant to accommodate.

Rodriguez-Pose (2010)

Social Science of Institutions.

Institutions are crucial for economic development → economic growth is fundamentally contingent on the mechanisms underpinning agglomeration economies (NEG) as well as the formal and informal institutions that govern trade and create environments conducive to innovation and productivity.

Moretti (2012)

Multipliers → trade-able jobs are the “engine of the economy”, creating jobs and boosting prosperity in the regions they cluster.

“Social Multipliers” → Low-skilled workers earn more in areas with more high-skilled workers (human capital externalities).

Although highly-educated workers are not fully compensated for the social benefit they create, they still gain from locating in the city as they optimise for private salaries (which are highest in the city) and too benefit from absorbing reciprocal knowledge from other highly educated colleagues.

Autor (2019)

Urban skilled wage premium has reduced to nearly zero for low-skilled workers and risen sharply for the high-skilled.

Gagliardi et al. (2023).

Technological change might lead human-capital cities to lose tasks but gain new industries.

Audrestch (2017)

Retraining workers can definitely help them find work again, but the multiplier effect only works if there are actually well paid jobs in the area.

Audrestch et al. (2007)

The internet can trigger the dispersal of matured firm activities (routinised) as there are few benefits to agglomeration so production and servicing can take place wherever is most cost-effective.

Example: Retail banking has digitalised, leading to the mass closure of physical branches. The city has a few, large headquarters with top strategy teams that focus on network-building, strategy and valuable deal executions.

Is this contributing to the erosion of middle-income jobs thus generating greater intra-regional erosion? Is this inclusive and sustainable growth?

Autor et al. (2013)

Firms focused on industries characterised by high uncertainty, highly unstable markets and information that is complex and difficult to codify gain from agglomeration.

Predictable industries carrying out routinised tasks with stable markets can benefit from de-agglomerating.