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These economies occur because of the geographic concentration of firms within an industry and the resultant decline in transportation and labor costs, encouragement of innovation, and ease of spreading new ideas. These agglomeration economies reduce the cost of city-produced goods to both city and suburban residents. The second premise is that weak central city government—marked by a variety of financial practices and fiscal institutions—imposes costs on city residents and firms andAmazing vintage everything will kill you so choose something fun veteran skull poster induces them to relocate. The relocation, though, reduces the agglomeration economies available in the city and causes the price of city-produced goods to rise. If both premises hold, weak city governments hurt suburban residents, weak city finances cause poor suburban economic health, and suburban residents should be willing to pay to improve center cities’ weak financial situation in order to preserve the benefits of agglomeration economies. Cities attract businesses and residents by providing high-quality amenities. But providing those amenities requires funding, and higher tax burdens increase incentives for city residents and firms to depart for lower tax locations. Balancing these considerations is an essential problem in urban public finance.
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