Space, agglomeration economies and urban development

In the major theories of economic development, the spatial aspect has often been neglected. Within the evolution of regional development theories, not only is there a shift in focus from exogenous to endogenous factors, but also an increasing importance of human capital in the development process. Agglomeration economies are ultimately driven by savings in transport costs, related not only to the exchange of goods and services, but also to people and ideas. Large cities play crucial role in knowledge spillover because the interaction of educated and creative people stimulates innovation. Also, it is obvious that there is a very pronounced feedback principle between urban growth and the knowledge spillover. Contemporary urbanization trends are perfectly matched with the technological advances of the new age which led to sharp decrease of costs of communication and transfer of information. These processes (that trigger pronounced agglomeration diseconomies, such as pollution, rising cost of living and congestion), accompanied by the demographic explosion that is especially evident in developing countries, bring into focus the problems of urban development.