Diversity and specialisation in cities: Why, where and when does it matter?

Why are some cities specialised and others diversified? What are the advantages and disadvantages of urban specialisation and diversity? To what extent does the structure of cities, and the activities of firms and people in them, change over time? How does the sectoral composition of cities influence their evolution? To answer these and related questions, we first distil some key stylised facts from the empirical literature on cities and the composition of their activities. We then turn to a review of different theories looking at such issues, and study the extent to which these theories contribute to the understanding of the empirical regularities.cities; diversity; specialisation

From sectoral to functional urban specialisation

Striking evidence is presented of a previously unremarked transformation of urban structure from mainly sectoral to mainly functional specialisation. We offer an explanation showing that this transformation is inextricably interrelated with changes in firms' organisation. A greater variety of business services for headquarters and of sector-specific intermediates for production plants within a city reduces costs, while congestion increases with city size. A fall in the costs of remote management leads to a transformation of the equilibrium urban and industrial structure. Cities shift from specialising by sector -- with integrated headquarters and plants -- to specialising mainly by function -- with headquarters and business services clustered in larger cities, and plants clustered in smaller cities.functional specialisation, cities, headquarters, business services

What we can and what we can't say about employment growth in specialised cities

There is an ongoing debate on whether certain sector structures enhance regional employment growth. Often, regional policies promote clusters and, hence, regional specialisation. It is commonly believed that clusters boost regional economic performance. However, in the present manuscript a simple model is introduced which suggests the reverse is true regarding employment growth. It is argued that specialised regions are prone to be affected stronger by sector-specific demand shocks than diversified ones and, therefore, show higher variances in employment growth rates. A test on the equality of variances in employment growth rates across two groups of specialised and diversified cities is conducted. It shows that, in Germany, variances are higher in the group of specialised cities. Thus, regional specialisation is more insecure than diversification with regard to stable employment growth rates. --

Nursery Cities: Urban Diversity, Process Innovation and the Life-Cycle of Products

A simple model of process innovation is proposed, where firms learn about their ideal production process by making prototypes. We build around this a dynamic general equilibrium model, and derive conditions under which diversified and specialised cities coexist. New products are developed in diversified cities, trying processes borrowed from different activities. On finding their ideal process, firms switch to mass-production and relocate to specialised cities with lower costs. When in equilibrium, this configuration welfare-dominates those with only diversified or only specialised cities. We find strong evidence of this relocation pattern in establishment relocations across French employment areas 1993û1996.Cities, diversity, specialisation, innovation, learning, life-cycle

Nursery Cities: Urban diversity, process innovation, and the life-cycle of products

This paper develops microfoundations for the role that diversified cities play in fostering innovation. A simple model of process innovation is proposed, where firms learn about their ideal production process by making prototypes. We build around this a dynamic general-equilibrium model, and derive conditions under which diversified and specialised cities coexist. New products are developed in diversified cities, trying processes borrowed from different activities. On finding their ideal process, firms switch to mass production and relocate to specialised cities where production costs are lower. We find strong evidence of this pattern in establishment relocations across French employment areas 1993-1996.nursery cities; diversity; specialisation; innovation; learning, life-cycle

The Randstad as a Network City

Randstad Holland, the most urbanised area in the western part of the Netherlands, is one of the seven World Cities that were described in Peter Halls famous study of that name. World cities are those cities which have the highest level (in terms of both quantity and quality) of internationally oriented activities. In this ranking of world cities, the Randstad is often mentioned as an example of a polycentric metropolis. But does the Randstad function as one world city, rather than a conglomerate of medium-sized urban regions in close proximity to each other? The network city is supposed to be more than the sum of the constituent urban regions. This implies not only specialisation between these urban regions, but also complementarity and, as a result of this, a high quality (metropolitan) environment for residents, visitors and business. Clearly, the four main urban regions of the Randstad show some degree of functional specialisation. In this paper, the main focus will be on the complementarity. We propose to measure complementarity by analysing flows of people, goods and/or information, specifically focussing on the asymmetric flows, against the background of functional specialisation. Some results are presented for the Randstad Holland as well as some other polycentric urban networks, which are discussed in the context of the debate about the Randstad as a Network City

Agglomeration externalities, innovation and regional growth: Theoretical perspectives and meta-analysis

Technological change and innovation and are central to the quest for regional development. In the globally-connected knowledge-driven economy, the relevance of agglomeration forces that rely on proximity continues to increase, paradoxically despite declining real costs of information, communication and transportation. Globally, the proportion of the population living in cities continues to grow and sprawling cities remain the engines of regional economic transformation. The growth of cities results from a complex chain that starts with scale, density and geography, which then combine with industrial structure characterised by its extent of specialisation, competition and diversity, to yield innovation and productivity growth that encourages employment expansion, and further urban growth through inward migration. This paper revisits the central part of this virtuous circle, namely the Marshall-Arrow-Romer externalities (specialisation), Jacobs externalities (diversity) and Porter externalities (competition) that have provided alternative explanations for innovation and urban growth. The paper evaluates the statistical robustness of evidence for such externalities presented in 31 scientific articles, all building on the seminal work of Glaeser et al. (1992). We aim to explain variation in estimation results using study characteristics by means of ordered probit analysis. Among the results, we find that the impact of diversity depends on how it is measured and that diversity is important for the high-tech sector. High population density increases the chance of finding positive effects of specialisation on growth. More recent data find more positive results for both specialization and diversity, suggesting that agglomeration externalities become more important over time. Finally, primary study results depend on whether or not the externalities are considered jointly and on other features of the regression model specification

Diversity and Specialisation in Cities: Why, Where and When does it Matter?

Why are some cities specialised and others diversified? What are the advantages and disadvantages of urban specialisation and diversity? To what extent does the structure of cities, and the activities of the firms and people in them, change over time? How does the sectoral composition of cities and influence their evolution? To answer these and related questions, we first distil some key stylised facts from the empirical literature on cities and the composition of their activities. We then turn ti a review of different theories looking ot such issues, and study the extent to which these theories contribute ti the understanding of the empirical regularities.

From Sectoral To Functional Urban Specialisation

We document and then develop a model explaining and relating changes in firms' organisation and in urban structure. Sharing of business services by headquarters and of sector-specific intermediates by production plants within a city reduces costs, while congestion increases with city size. A fall in the costs of remote management leads to a shift in urban structure, from a configuration where cities specialise by sector and host integrated headquarters and production plants, to a configuration where cities specialise by function, with headquarters from different sectors and business services clustered in a few large cities and production plants from each sector clustered in smaller separate cities.functional specialisation, cities, business services, headquarters