Barcelona's Industrial Clusters: Cumulative Causation
Barcelona's manufacturing and high-tech industry displays a strong tendency to cluster.
The new models of industrial location explain this as the result of the tension between two opposing forces. Agglomeration forces encourage firms to concentrate in a few locations: firms benefit from locating near each other because, for example, they have access to larger pools of skilled labour. But wage differences (or other factor supply issues such as truck rental) push in the opposite direction: if too many firms locate close together, the competition for labour forces wages up. This encourages the dispersion of industry. The agglomeration forces may overcome the dispersion forces if workers migrate easily or if there are strong vertical linkages between firms operating in the same or related industries.
A combination of economies of scale and transport costs encourages many firms to locate close to Barcelona, a market in the wider metropolitan area of some four million people. Wages in this region are higher than elsewhere but the transport savings created by linkages compensate for the higher wage costs, land costs and traffic congestion.
The hallmark of these location models is that agglomeration forces tend to encourage the concentration of industrial activity via 'cumulative causation'. In other words, spatial concentration itself creates an environment that encourages spatial concentration. The early stages of clustering bring large gains as firms exploit economies of scale by concentrating production close to the market where they have more customers and suppliers. Agglomeration forces tend to be sector-specific as a given firm will want to locate close to its particular buyers and suppliers. This encourages increasing specialization and tends to increase the differences between rich and poor regions, even if there are overall gains.