Duranton, Gilles and Puga, Diego (2001) From sectoral to functional urban specialisation. CEPDP, 511. Centre for Economic Performance, London School of Economics and Political Science, London, UK. ISBN 0753014998
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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.
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