1. Introduction
Cities play a key role in encouraging and enhancing economic development. The impact of agglomeration is a key factor here. Agglomeration refers to the productivity benefits, reflected in wage rates, that are derived from the increasing densification or scale of economic activities. This is seen to be a key feature of the development of cities overseas.
In New Zealand, the importance of Auckland is reflected in the Government's economic transformation policies. With a high percentage of globally connected activities located in the central business district (CBD), Auckland has a key role in leading the regional and national economies to higher levels of productivity and competitiveness.
At a more local level, the themes of economic growth are highlighted in a number of local and regional strategies, including the Regional Growth Strategy (RGS), the Auckland Regional Economic Development Strategy (AREDS) and the Auckland Region Business Land Strategy (ARBLS).
While a general perception of the benefits of agglomeration exists, there has been little investigation and analysis of these benefits in a New Zealand context, and more particularly in an Auckland context. Following a presentation by Bridget Rosewell, Chief Economist of the Greater London Authority (GLA) in London, John Williamson and David Waite of Ascari Partners, and Richard Paling of Richard Paling Consulting Ltd, undertook some initial work, looking at the theoretical background of agglomeration impacts, as well as a preliminary investigation of the quantitative relationships in the Auckland region. This was subsequently presented to members of the Government Urban and Economic Development Office (GUEDO) in Auckland in July 2006 and to a large group of officials from a number of Government departments in Wellington in August 2006. The Ministry of Economic Development subsequently requested that a detailed summary of the presentation be written up in a technical note, which is presented here.
This paper covers the following areas:
- A review of the patterns of urban growth, both internationally and in New Zealand (Section 2).
- An explanation of the theory of agglomeration and how it affects city growth, including an analysis of the empirical evidence supporting the presence of agglomeration effects (Section 3).
- An examination of the recent development of Auckland, and constraints which may be impeding future expansion (Section 4).
- The quantification of agglomeration impacts in London, based on an approach which examines the relationships between employment density and productivity, and accessibility and employment density (Section 5).
- The quantification of agglomeration impacts in Auckland, using the London approach (Sections 6 and 7).
- A review of possible complementary measures that may be required to achieve the potential benefits (Section 8).
The primary purpose of this paper is to provide a preliminary examination of the agglomeration effects taking place in Auckland, by outlining a range of simple relationships. While the paper has been developed with a policy audience in mind, it would likely be of interest to a wider audience given the intent is to promote a better understanding of Auckland's role in achieving Government's economic transformation agenda. While the findings of this paper may have significant implications for policy makers, further economic analyses would be necessary to refine and develop our findings.
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