Urban Economics within the United Kingdom

Urban Economics within the United Kingdom
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Course Code: Globalization and Economics
Table of Contents
i. Introduction
ii. The economic rise of London
iii. The economic decline of Manchester
iv. A policy for urban economic growth in Casterbridge
v. Conclusion
i. Introduction
Urban economics is traditionally understood as the economic study of urban
areas; as such, it includes using theories of economics to analyze urban issues such as
crime, education, public transit, housing, and municipal government finance. More
specifically, it is a branch of microeconomics that studies urban spatial structure and the
location of households and firms (Quigley, 2008). This analysis will investigate the
growth of London since the 1980s against the decline of other British cities and conclude
with an urban economic plan for the small municipal region of Casterbridge.
While it can be said that most economically advanced societies are marked by high
levels of urbanization, the reasoning underlying this observation is that the productivity
of capital and labor is greatly enhanced where selected units of each come together in
geographic space to form interconnected systems or agglomerations of firms and workers
(Storper and Scott, 2009). In these agglomerations, productive activity (industrial,
service, retail, etc.) is functionally fragmented into complex divisions of labor, and then
brought back together again through processes of economic coordination—in the form of
traded and untraded interdependencies—between firms and within labor markets.
The relevant question thus becomes what specific circumstances sustain and account for
different kinds of innovative urban economic growth within Great Britain? In particular,
how has London managed to sustain economic growth while other urban economic areas
have gone into stagnation and decline?
ii. The Economic Rise of London
A new period of neo-liberal economics began in 1979 with the election of the
Thatcher government and a return to Conservative Party dominance within the United
Kingdom that remained throughout the 1980s. During the 1980s most state-owned
enterprises were privatized, taxes cut and markets deregulated, GDP fell 5.9% at first, but
later rose to 5% at its peak in 1988.1 Ades and Glaeser (1995) suggest that London as a
trade city grew through commerce. London’s ancient core, known as the City of London,
is the financial centre of the United Kingdom. It is important to note that the City of
London generates approximately 20 per cent of the UK's GDP (or $446 billion in 2005);
while the economy of the London metropolitan area, generates approximately 30 per cent
of the UK's GDP (or an estimated $669 billion in 2005) (Lecomte, 2008).
According to Lecomte (2008), educational factors in combination with a young
population helps to sustain the vigor of a regional economy. Others including Henderson
and Black (1999) suggest that Individual city sizes grow with local human capital
accumulation and knowledge spillovers. Within the urban metropolis of London, the
city’s largest industry is finance, and its financial exports make it a large contributor to
the UK's balance sheets. According to estimates, 325,000 people were employed in

1 For detailed statistics on the economic growth of the United Kingdom in the 1980s see
“Edit/Review Countries." www.Imf.org. 29 April 2003. Retrieved 8 December 2012:
Appendix 1: Chart taken from D. Lecomte “The Economic Positioning of Metropolitan
Areas in North Western Europe" detailing the percentage of GDP per metropolitan
Ades, A. F., & Glaeser, E. L. (1995). Trade and circuses: explaining urban giants. The
Quarterly Journal of Economics, 110(1), 195-227.
Black, Duncan and Vernon Henderson, "A Theory of Urban Growth," Journal of
Political Economy, 107 (2), 252- 283 (1999).
Ciccone, Antonio and Robert Hall, “Productivity and the Density of Economic Activity,”
American Economic Review, 86 (1) 55- 70 (1996).
Lecomte, D. (2002). "The Economic Positioning of Metropolitan Areas in North Western
Europe."The Institute for Urban Planning and Development of the Paris Île-deFrance Region.
Quigley, John M. (2008). Urban economics. The New Palgrave Dictionary of Economics.
Rauch, J. (1993). Productivity Gains from Geographic Concentration of Human Capital:
Evidence from the Cities. Journal of Urban Economics 34: 3- 33.
Strooper, Michael & Scott, Allen. (2009). Rethinking human capital, creativity and urban
growth. Journal of Economic Geography, 9, 147-167. 

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