RETHINKING THE ECONOMICS OF LOCATION AND AGGLOMERATION

Fundamental problems exist with the classical characterisation of aggl omeration economies, since such definitions do not reflect the various cost issues on which firms may wish to economise. A lack of understan ding of the relationship between the notions of market hierarchies and locational behaviour leads to confusion not only in applied economic interpretation, but more fundamentally in the construction of theoreti cal location models, In particular, neo-classical location theory can be shown to be crucially flawed as a basis for spatial analysis, This paper therefore attempts to provide an alternative definition of the v arious types of agglomeration economies such that the various strands of economic theory might be used in a more rigorous manner in the disc ussion of spatial increasing returns.