Question

Distinguish between two types of agglomeration:  Localization economies, and Urbanization economies?

Answer 1

Localization and urbanisation economies, or agglomeration economies, are two types of external economies of scale. Because of causes outside of an particular organisation, external economies of scale arise from a rise in the output of an entire sector, country, or economy. External economies of scale have three sources: input distribution, labour force pooling and information spillovers.
Localization economies emerge as a growth in the scale of a city's industry leads to an increase in a given activity 's productivity. Silicon Valley's intensely focused high tech economy exemplifies industrial localization. While the cost of labour and land in Silicon Valley is very high, because of the additional value they gain from their access to a high-skilled labour pool, high tech businesses prefer to locate there. For each company based in Silicon Valley, the scale of the high-tech sector produces favourable externalities.

Economies of urbanisation occur as the city's size contributes to an increase in productivity. Los Angeles exemplifies the economy of urbanisation in that it does not have a single dominate sector, but continues to expand. The common capital and broad labour pool found in the city support businesses that locate in Los Angeles. Popular services such as bridges , buildings and electricity supplies support companies, regardless of their industry, in cities. And, by locating in cities, businesses have greater access to workers. Good externalities that favour many various sectors are generated by the urban climate. Jane Jacobs is also credited with the notion that spatial diversity and the scale of a population contribute to economies of agglomeration.