The United States has, on average, 24 jobs per square mile, but metropolitan areas average about 124 jobs per square mile.

The standard explanation for why firms locate in metropolitan areas is that they can lower their production costs by taking advantage of agglomeration economies — efficiency gains and cost savings that result from being close to suppliers, workers, customers, and even competitors. Although population and jobs have grown more within metropolitan areas than outside them, growth has favored smaller metropolitan areas. During the second half of the 20th century, employment has become more evenly distributed across metropolitan areas. Some observers claim that this deconcentration of people and jobs is the result of a greater preference for less urbanized living. Others say it’s the result of reductions in urban agglomeration economies due to technological change and government policies, such as the building of interstate highways.

This article appeared in the July/August 1998 edition of Business Review.

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