Wednesday, September 06, 2006

Agglomeration

Martin Wolf talks about a paper presented by Tony Venables to the recent Fed conference in Jackson Hole talking about the effects of agglomeration and its influence on development.

"The conclusion of this line of analysis is that production will shift only where the benefits of agglomeration are relatively small or the benefits of moving activities are large. Moving back-office functions is an example of the former. Shifting production of clothing to poorer countries is an example of the latter. But the advantages of established centres of expertise are enduring, provided some effort is put into maintaining them: London has been a world-class financial centre for almost three centuries. The relocation of activity will, suggests Prof Venables, prove both difficult and “lumpy”."

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