Fed Bank Study: Agglomeration Economics (Clusters) Important to Cities in Future

Read this. It speaks to the future role of clusters in future urban economic development. Note the shifts. They are important.

Agglomeration economies will continue to play a large role in the life of 21st century cities. But unlike in earlier times, today’s agglomeration economies have turned cities into centers
for consumption, rather than places for manufacturing goods. In turn, this shift in focus means that cities now tend to attract more highly skilled and highly paid workers—people who want
more consumption options. Consequently, modern cities must offer a wide choice of amenities to attract the high-skill workers needed in this new type of agglomeration economy.

Public policy can play a significant role in attracting and retaining highly skilled workers. Even though the productivity advantages that cities offer to firms may have waned in recent decades,
the nation’s largest urban areas retain many advantages in providing consumption benefits that people value. Glaeser and co-authors’ 2001 study suggests that local policymakers need to focus on lifestyle issues because they are important in attracting and retaining high-skill workers. One such policy is providing good public schools. Other policies might focus on reducing urban crime and providing amenities such as clean streets and public parks.

Download the paper here.