1932

Abstract

Urbanization is taking place at an unprecedented pace and scale in China, India, and many other emerging economies. This will have profound impacts on the world economy and environment. This review provides a critical assessment of the current understanding of the intertwined relationships between agglomeration, economic growth, and environmental quality. We start by providing a brief overview of the extensive literature on the drivers of agglomeration and its economic impact. We then discuss the opposing views on the environmental impact of agglomeration and illustrate the trade-offs involved when choosing among different levels and forms of agglomeration. Finally, we discuss challenges for environmental management in a rapidly urbanizing economy and some lessons learned from history and experiences of urban development and their policy implications. The review concludes with a discussion of key knowledge gaps and future research directions.

Loading

Article metrics loading...

/content/journals/10.1146/annurev-resource-100518-094151
2019-10-05
2024-05-30
Loading full text...

Full text loading...

/deliver/fulltext/resource/11/1/annurev-resource-100518-094151.html?itemId=/content/journals/10.1146/annurev-resource-100518-094151&mimeType=html&fmt=ahah

Literature Cited

  1. Acemoglu D, Robinson JA, Torvik R 2013. Why do voters dismantle checks and balances. Rev. Econ. Stud. 80:3845–75
    [Google Scholar]
  2. Albers HJ. 2014. Spatial management of renewable natural resources. Encyclopedia of Energy, Natural Resource, and Environmental Economics Vol. 2: Resources, ed. JF Shogren 119–23 London, UK: Elsevier
    [Google Scholar]
  3. Ando AW. 2014. Optimization across space. Encyclopedia of Energy, Natural Resource, and Environmental Economics Vol. 2: Resources JF Shogren 60–67 London, UK: Elsevier
    [Google Scholar]
  4. Arnott R, Hochman O, Rausser GC 2008. Pollution and land use: optimum and decentralization. J. Urban Econ. 64:390–407
    [Google Scholar]
  5. Artz G, Kim Y, Orazem P 2016. Does agglomeration matter everywhere? New firm location decisions in rural and urban markets. J. Reg. Sci. 56:172–95
    [Google Scholar]
  6. Atkinson SE, Tietenberg TH. 1982. The empirical properties of two classes of designs for transferable discharge permit markets. J. Environ. Econ. Manag. 9:2101–21
    [Google Scholar]
  7. Au C-C, Henderson V. 2006. Are Chinese cities too small. Rev. Econ. Stud. 73:549–76
    [Google Scholar]
  8. Baumol WJ, Oates WE. 1988. The Theory of Environmental Policy Cambridge, UK: Cambridge Univ. Press. , 2nd ed..
  9. Bento AM, Cropper ML, Mobarak AM, Vinha K 2005. The effects of urban spatial structure on travel demand in the United States. Rev. Econ. Stat. 87:3466–78
    [Google Scholar]
  10. Black D, Henderson V. 1999. A theory of urban growth. J. Political Econ. 107:252–84
    [Google Scholar]
  11. Black D, McKinnish T, Sanders S 2005. The economic impact of the coal boom and bust. Econ. J. 115:503449–76
    [Google Scholar]
  12. Bovenberg AL, de Mooij RA 1994. Environmental levies and distortionary taxation. Am. Econ. Rev. 84:1085–89
    [Google Scholar]
  13. Broersma B, Oosterhaven J. 2009. Regional labor productivity in the Netherlands: evidence of agglomeration and congestion effects. J. Reg. Sci. 49:3483–511
    [Google Scholar]
  14. Broersma L, van Dijk J 2008. The effect of congestion and agglomeration on multifactor productivity growth in Dutch regions. J. Econ. Geogr. 8:181–209
    [Google Scholar]
  15. Buchanan JM. 1969. External diseconomies, corrective taxes, and market structure. Am. Econ. Rev. 59:1174–77
    [Google Scholar]
  16. Carlino G, Chatterjee S, Hunt R 2007. Urban density and the rate of invention. J. Urban Econ. 61:389–419
    [Google Scholar]
  17. Ciccone A, Hall R. 1996. Productivity and the density of economic activity. Am. Econ. Rev. 86:54–70
    [Google Scholar]
  18. Corden WM, Neary JP. 1982. Booming sector and de-industrialization in a small open-economy. Econ. J. 92:825–49
    [Google Scholar]
  19. Demailly D, Quirion P. 2006. CO2 abatement, competitiveness and leakage in the European cement industry under the EU ETS: grandfathering versus output-based allocation. Clim. Policy 6:193–113
    [Google Scholar]
  20. Duranton G, Puga D. 2014. The growth of cities. Handbook of Economic Growth A Philippe, ND Steven 781–853 Amsterdam: Elsevier
    [Google Scholar]
  21. Elbers C, Withagen C. 2004. Environmental policy, population dynamics and agglomeration. Contrib. Econ. Anal. Policy 3:2 https://doi.org/10.2202/1538-0645.1286
    [Crossref] [Google Scholar]
  22. Ellison G, Glaeser EL. 1999. The geographic concentration of industry: does natural advantage explain agglomeration. Am. Econ. Rev. 89:2311–26
    [Google Scholar]
  23. Ellison G, Glaeser EL, Kerr WR 2010. What causes industry agglomeration? Evidence from coagglomeration patterns. Am. Econ. Rev. 100:31195–213
    [Google Scholar]
  24. Farrow RS, Schultz MT, Celikkol P, Van Houtven GL 2005. Pollution trading in water quality limited areas: use of benefits assessment and cost-effective trading ratios. Land Econ 81:2191–205
    [Google Scholar]
  25. Feldman MP, Audretsch DB. 1999. Innovation in cities: science-based diversity, specialization and localized competition. Eur. Econ. Rev. 43:2409–29
    [Google Scholar]
  26. Foley JA, DeFries R, Asner GP, Barford C, Bonan G et al. 2005. Global consequences of land use. Science 309:570–74
    [Google Scholar]
  27. Fowlie M, Muller N. 2013. Market-based emissions regulation when damages vary across sources: What are the gains from differentiation? NBER Work Pap 18801
  28. Fowlie M, Reguant M, Ryan S 2016. Market-based emissions regulation and industry dynamics. J. Political Econ. 124:1249–302
    [Google Scholar]
  29. Fu S, Hong J. 2011. Testing urbanization economies in manufacturing industries: Urban diversity or urban size. J. Reg. Sci. 51:585–603
    [Google Scholar]
  30. Fujita M, Ogawa H. 1982. Multiple equilibria and structural transition of non-monocentric configurations. Reg. Sci. Urban Econ. 12:161–96
    [Google Scholar]
  31. Fujita M, Thisse J-F. 2002. Economics of Agglomeration: Cities, Industrial Location, and Regional Growth New York: Cambridge Univ. Press
  32. Fullerton D. 1997. Environmental levies and distortionary taxation: comment. Am. Econ. Rev. 87:245–51
    [Google Scholar]
  33. Fullerton D, Metcalf GE. 2001. Environmental controls, scarcity rents, and pre-existing distortions. J. Public Econ. 80:249–67
    [Google Scholar]
  34. Glaeser E. 1998. Are cities dying. J. Econ. Perspect. 12:139–60
    [Google Scholar]
  35. Glaeser E. 2011. Triumph of the City New York: Penguin
  36. Glaeser E, Kahn ME. 2010. The greenness of cities: carbon dioxide emissions and urban development. J. Urban Econ. 67:3404–18
    [Google Scholar]
  37. Glaeser E, Kallal H, Scheinkman J, Shleifer A 1992. Growth in cities. J. Political Econ. 100:1126–52
    [Google Scholar]
  38. Gong Z, Wang C. 2017. PM 2.5 concentration, population distribution and exposure: data and calculations Data Summ., Shanghai Jiaotong Univ., China
  39. Goulder LH. 1995. Environmental taxation and the double dividend: a reader's guide. Int. Tax Public Finance 2:157–84
    [Google Scholar]
  40. Grazi F, van den Bergh JCJM, van Ommeren JN 2008. An empirical analysis of urban form, transport, and global warming. Energy J 29:497–122
    [Google Scholar]
  41. Grimm NB, Faeth SH, Golubiewski NE, Redman CL, Wu JG et al. 2008. Global change and the ecology of cities. Science 319:756–60
    [Google Scholar]
  42. Hansen AJ, Knight RL, Marzluff J, Powell S, Brown K, Hernandez P, Jones K 2005. Effects of exurban development on biodiversity: patterns, mechanisms, research needs. Ecol. Appl. 15:1893–905
    [Google Scholar]
  43. Henderson JV. 1974. Optimum city size: the external diseconomy question. J. Political Econ. 82:373–88
    [Google Scholar]
  44. Henderson JV. 2010. Cities and development. J. Reg. Sci. 50:1515–40
    [Google Scholar]
  45. Holland SP. 2012. Emissions taxes versus intensity standards: second-best environmental policies with incomplete regulation. J. Environ. Econ. Manag. 63:3375–87
    [Google Scholar]
  46. Holland SP, Yates AJ. 2015. Optimal trading ratios for pollution permit markets. J. Public Econ. 125:16–27
    [Google Scholar]
  47. Irwin EG, Bell KP, Bockstael NE, Newburn DA, Partridge MD, Wu JJ 2009. The economics of urban-rural space. Annu. Rev. Resour. Econ. 1:435–62
    [Google Scholar]
  48. Irwin EG, Isserman AM, Kilkenny M, Partridge MD 2010. A century of research on rural development and regional issues. Am. J. Agric. Econ. 92:2522–53
    [Google Scholar]
  49. Jacobsen MR, Knittel CR, Sallee JM, van Benthem AA 2016. Sufficient statistics for imperfect externality-correcting policies NBER Work Pap 22063
  50. Jeppesen T, List JA, Folmer H 2002. Environmental regulations and new plant location decisions: evidence from a meta-analysis. J. Reg. Sci. 42:119–49
    [Google Scholar]
  51. Jofre-Monseny J, Marín-López R, Viladecans-Marsal E 2011. The mechanisms of agglomeration: evidence from the effect of inter-industry relations on the location of new firms. J. Urban Econ. 70:2–361–74
    [Google Scholar]
  52. Kelsey TW, Partridge MD, White NE 2016. Unconventional oil and gas development in the United States: economic experience and policy issues. Appl. Econ. Perspect. Policy 38:2191–214
    [Google Scholar]
  53. Krugman P. 1991. Increasing returns and economic geography. J. Political Econ. 99:483–99
    [Google Scholar]
  54. Krupnick AJ, Oates WE, de Verg EV 1983. On marketable air-pollution permits: the case for a system of pollution offsets. J. Environ. Econ. Manag. 10:3233–47
    [Google Scholar]
  55. Kyriakopoulou E, Xepapadeas A. 2013. Environmental policy, first nature advantage and the emergence of economic clusters. Reg. Sci. Urban Econ. 43:1101–16
    [Google Scholar]
  56. Lamberson RH, McKelvey R, Noon BR, Voss C 1992. A dynamic analysis of northern spotted owl viability in a fragmented forested landscape. Conserv. Biol. 6:505–12
    [Google Scholar]
  57. Levinson A, Taylor MS. 2008. Unmasking the pollution haven effect. Int. Econ. Rev. 49:223–54
    [Google Scholar]
  58. Lewis D, Wu JJ. 2014. Land-use patterns and spatially dependent ecosystem services: some microeconomic foundations. Int. Rev. Environ. Resour. Econ. 8:191–223
    [Google Scholar]
  59. Lohse KA, Newburn DA, Opperman JJ, Merenlender AM 2008. Forecasting relative impacts of land use on anadromous fish habitat to guide conservation planning. Ecol. Appl. 18:467–82
    [Google Scholar]
  60. Lucas RE. 1988. On the mechanics of economic development. J. Monetary Econ. 22:3–39
    [Google Scholar]
  61. Markusen J, Morey ER, Olewiler N 1993. Environmental policy when market structure and plant locations are endogenous. J. Environ. Econ. Manag. 24:69–86
    [Google Scholar]
  62. Marshall A. 1920. Principles of Economics London: MacMillan
  63. McKinsey Global Inst 2009. Preparing for China's Urban Billion New York: McKinsey & Co.
  64. Mendelsohn R. 1986. Regulating heterogeneous emissions. J. Environ. Econ. Manag. 13:301–12
    [Google Scholar]
  65. Montgomery WD. 1972. Markets in licenses and efficient pollution control programs. J. Econ. Theory 5:3395–418
    [Google Scholar]
  66. Moretti E. 2004. Workers’ education, spillovers, and productivity: evidence from plant-level production functions. Am. Econ. Rev. 94:3656–90
    [Google Scholar]
  67. Muller NZ, Mendelsohn R. 2009. Efficient pollution regulation: getting the prices right. Am. Econ. Rev. 99:51714–39
    [Google Scholar]
  68. Oates WE, Strassmann DL. 1984. Effluent fees and market structure. J. Public Econ 24:129–46
    [Google Scholar]
  69. OECD (Organ. Econ. Co-op. Dev.) 2010. Regional Development Policies in OECD Countries Paris: OECD
  70. OECD (Organ. Econ. Co-op. Dev.) 2018. Rethinking Urban Sprawl: Moving Towards Sustainable Cities Paris: OECD
  71. Oueslati W, Salanié JW, Wu JJ 2019. Urbanization and agricultural productivity: some lessons from European cities. J. Econ. Geogr. 19:225–49
    [Google Scholar]
  72. Owen D. 2004. Green Manhattan: everywhere should be more like New York. The New Yorker Oct 18111–23 https://www.newyorker.com/magazine/2004/10/18/green-manhattan
    [Google Scholar]
  73. Partridge M, Bollman R, Olfert R, Alasia A 2007. Riding the wave of urban growth in the countryside: spread, backwash, or stagnation. Land Econ 83:128–52
    [Google Scholar]
  74. Puga D. 2010. The magnitude and causes of agglomeration economies. J. Reg. Sci. 50:1203–19
    [Google Scholar]
  75. Rappaport J. 2009. The increasing importance of quality of life. J. Econ. Geogr. 9:779–804
    [Google Scholar]
  76. Rosenthal SS, Strange WC. 2003. Geography, industrial organization, and agglomeration. Rev. Econ. Stat. 85:2377–93
    [Google Scholar]
  77. Rosenthal SS, Strange WC. 2004. Evidence on the nature and sources of agglomeration economies. Handbook of Regional and Urban Economics JV Henderson, T Jacques-François 2119–71 Amsterdam: Elsevier
    [Google Scholar]
  78. Saito H, Wu JJ. 2016. Agglomeration, congestion, and regional disparities in US employment growth. J. Reg. Sci. 56:53–71
    [Google Scholar]
  79. Schmitt B, Henry MS, Piguet V, Hilal M 1997. Urban growth effects on rural population, export and service employment: evidence from eastern France. Ann. Reg. Sci. 40:779–801
    [Google Scholar]
  80. Seto KC, Fragkias M, Güneralp B, Reilly MK 2011. Meta-analysis of global urban land expansion. PLOS ONE 6:8e23777
    [Google Scholar]
  81. Shapiro JM. 2006. Smart cities: quality of life, productivity, and the growth effects of human capital. Rev. Econ. Stat. 88:2324–35
    [Google Scholar]
  82. Szabó L, Hidalgo I, Ciscar JC, Soria A 2006. CO2 emission trading within the European Union and Annex B countries: the cement industry case. Energy Policy 34:172–87
    [Google Scholar]
  83. Tietenberg TH. 1974. Derived demand rules for pollution control in a general equilibrium space economy. J. Environ. Econ. Manag. 1:3–16
    [Google Scholar]
  84. United Nations 2015. World urbanization prospects: the 2014 revision Rep. ST/ESA/SER/A/366, UN Dep Econ. Soc Aff., Pop. Div., UN New York: https://esa.un.org/unpd/wup/Publications/Files/WUP2014-Report.pdf
  85. Vance C, Hedel R. 2008. On the link between urban form and automobile use: evidence from German survey data. Land Econ 84:151–65
    [Google Scholar]
  86. Van Oss H, Padovani A 2003. Cement manufacture and the environment, part II: environmental challenges and opportunities. J. Ind. Ecol. 7:193–126
    [Google Scholar]
  87. von Thünen JH. 1966 (1826). Von Thünen's Isolated State: An English Edition of Der Isolierte Staat, trans CM Wartenberg New York: Pergamon
  88. Wang C, Wu JJ. 2018. Agglomeration economies and the impact of environmental regulation: water pollution control in China Work. Pap Oregon State Univ Corvallis:
  89. Wu JJ. 2006. Environmental amenities, urban sprawl, and community characteristics. J. Environ. Econ. Manag 52:527–47
    [Google Scholar]
  90. Wu JJ. 2014. Public open space conservation under a budget constraint. J. Public Econ. 111:96–101
    [Google Scholar]
  91. Wu JJ, Fisher M, Pascual U 2011. Urbanization and the viability of local agricultural economies. Land Econ 87:109–25
    [Google Scholar]
  92. Wu JJ, Plantinga AJ. 2003. The influence of public open space policies on urban spatial structure. J. Environ. Econ. Manag. 46:288–309
    [Google Scholar]
  93. Wu JJ, Reimer J. 2016. Pollution mobility, productivity disparity, and the spatial distribution of polluting and nonpolluting firms. J. Reg. Sci. 56:615–34
    [Google Scholar]
  94. Wu JJ, Segerson K. 2018. Mobility, agglomeration, and the effectiveness of environmental regulation Work. Pap Oregon State Univ Corvallis:
  95. Wu JJ, Weber B, Partridge M 2017. Rural-urban interdependency: a framework integrating regional, urban and environmental economic insights. Am. J. Agric. Econ. 99:2464–80
    [Google Scholar]
  96. Wu C, Wu JJ. 2012. Agglomeration, environmental regulation and plant's location decisions Paper presented at the Association of Environmental and Resource Economists, Summer Conference Asheville, NC: June 3–5
  97. Zeng D-Z, Zhao L. 2009. Pollution havens and industrial agglomeration. J. Environ. Econ. Manag. 58:2141–53
    [Google Scholar]
/content/journals/10.1146/annurev-resource-100518-094151
Loading
/content/journals/10.1146/annurev-resource-100518-094151
Loading

Data & Media loading...

  • Article Type: Review Article
This is a required field
Please enter a valid email address
Approval was a Success
Invalid data
An Error Occurred
Approval was partially successful, following selected items could not be processed due to error