THE IMPACT OF CHANGING BUSINESS AGGLOMERATION ECONOMIES ON METROPOLITAN GROWTH

ABSTRACT This paper aims to determine the impact of changes in the parameters measuring economies of scale in production on metropolitan growth. The degree of spatial concentration of sectoral economic activity and patterns of trade between two metropolitan areas are explained with a two-sector model borrowed from the international trade literature. It is shown that sectoral production will become more concentrated as the importance of intrasectoral economics of scale relative to intersectoral scale economics increases. An increase in the relative size of intrasectoral business agglomeration economics will not necessarily lead to complete specialisation by either metropolitan area.