Journal
JOURNAL OF URBAN ECONOMICS
Volume 57, Issue 2, Pages 343-370Publisher
ACADEMIC PRESS INC ELSEVIER SCIENCE
DOI: 10.1016/j.jue.2004.12.002
Keywords
functional specialisation; cities; headquarters; business services
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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. (c) 2004 Elsevier Inc. All rights reserved.
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