We document and then develop a model explaining and relating changes in firms’ organization and in urban structure. Sharing of business services by headquarters and of sector-specific intermediates by production plants within a city reduces costs, while congestion increases with city size. A...

This review of recent contributions reveals common conclusions about the effects of integration on location. For high trade costs the need to supply markets locally encourages firms to spread across different regions. Integration weakens the incentives for self-sufficiency and for intermediate...

Striking evidence is presented of a previously unremarked transformation of urban structure from mainly sectoral to mainly functional specialisation. We offer an explanation showing that this transformation is inextricably interrelated with changes in firms' organisation. A greater variety of...