Agglomeration economies emphasize the role that cities can play in speeding the flow of ideas. The core idea at the center of information-based agglomeration economies is that all of the knowledge builds on things that one learns from the people around. The central premise is that the presence of knowledgeable neighbors enables an apprentice steelworker to learn his craft, but it also makes a biotechnology researcher more innovative. The interaction of smart people in urban areas enhances the development of person-specific human capital and increases the rate at which new ideas are formed. A central paradox is that in cities, industrial agglomerations remain remarkably vital, despite ever easier movement of goods and knowledge across space. One of the facts that support the existence of agglomeration economies is the strong relationship between density and high wages. Understanding agglomeration economies requires moving beyond measuring the overall extent of agglomeration as revealed by housing prices, productivity, and population concentration and the exact mechanisms that make it more productive to cluster. The measurement of such nonlinearities is only one of the pressing topics for future research in this area.
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