Does agglomeration process exist in small provincial urban centers? Evidences from Sverdlovsk region

Abstract

In this paper we analyze the agglomeration of three small urban centers in Sverdlovsk Region (Russia). We describe agglomeration economies as the process where firm can be divided into those based on internal economies and those based on external economies, and also that each kind of economy can be viewed from the perspectives of scale, scope, and complexity. In our example, agglomeration economies are based on the internal economies. All analyzed towns are different in the level of industrial production, economies of scale and increasing returns. Industrial agglomeration effects are conceptually classified into localization and urbanization economies. We believe that agglomeration is strong only in small towns with the effective industrial production. As methods we used the Cobb-Douglas production function. Results of the research showed that only a town with industrial specialization (Verkhnyaya Salda) is characterized by constant returns to scale and the growth of total production which is mainly determined by increasing of capital. The other two cases of the towns (which are not industrial specialized) do not generate these results. Moreover, the town which not develops industrial production has no any effect of agglomeration. Agglomeration effects can be observed at different levels of aggregation. Large cities provide greater opportunity for economies of scale, availability of quality human capital, cluster effects, innovation processes and knowledge spillover, but under certain conditions smaller towns can also achieve some of the effects of agglomeration.