ECP-4613 Chapter Notes - Chapter 3: Fax, W. M. Keck Observatory, Output Gap
Document Summary
The forces acting on firms in a single industry together are called localization economies, indicating that they are local to a particular industry. When agglom economies cross industry boundaries, they are called urbanization economies. Some competing firms locate close to one another to share a firm that supplies an intermediate input something one firm produces that a second firm uses as an input in its prod process. Conventional list of prod inputs: labor, raw materials. , and capital, but ignores intermediate inputs. Dress-button model: bc button producers are indivisible inputs/specialized labor, cost per button decr as quant incr. Two assumptions: face time dressmaker must be located near button sup modification cost costs to modify the button to match. Firms will continue to join a cluster as long as the output gap is positive/as long as the cluster location is more profitable than the isolated location. The agglom econs from sharing an intermed input supplier generate self-reinforcing changes.
