Formation and Growth of Economic Agglomerations and Industrial Clusters: A Theoretical Framework from the Viewpoint of Spatial Economics

Abstract

Drawing on the framework of spatial economics, this chapter presents a microeconomic framework for understanding the formation and growth of economic agglomerations and industrial clusters. Spatial economics, a field created in the early 1990s, represents a new branch of economics that aims to explain the formation and growth of various forms of economic agglomeration in geographical space, using a general equilibrium framework combined with an evolutionary approach. Spatial economics is often called “the new economic geography,” and the two terms are often used interchangeably throughout this chapter.1 Although the chapter’s main focus is on the theory used to explain industrial agglomerations and clusters, we also consider the difference between various forms or types of economic agglomerations. Given that most industrial agglomerations in the real world are embedded in a larger agglomeration such as a city or a region, a broader viewpoint is helpful to achieve a comprehensive understanding of the formation and growth of a specific industrial agglomeration or cluster.KeywordsTransport CostInnovation ActivityTrade CostEconomic GeographyIndustrial DistrictThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.