Economies of scope and economies of agglomeration: The Goldstein-Gronberg contribution revisited

Abstract

Following on from the work of Goldstein and Gronberg, it is argued that under certain conditions, internal economies of scope form the bases for two types of agglomeration economy. These differ from two better known types, which are based on internal and external economies of scale. A further two types of agglomeration economy are shown to derive from particular forms of external economy. Attention is then given to the conditions under which economies of scope may be accompanied by either agglomeration economies or agglomeration diseconomies, both internal to the firm. The discussion is extended to the setting of a simple urban system, where agglomeration economies and diseconomies internal to the firm may each exist alongside agglomeration economies or diseconomies deriving from externalities. A scheme is then outlined, in which the various types of agglomeration economy are drawn together within a common framework.