Agglomeration economies play a fundamental role in the explanation of urban growth. However, recent theoretical approaches present some contradictions. The literature, in fact, explains growth by means of a static concept of agglomeration economies, suggesting that large cities, because of their larger size and higher efficiency, automatically foster the overall performance of the system. This paper aims at overcoming this limitation, suggesting a novel theoretical approach that explains the time dynamics of urban productivity linked to city size. Theoretical expectations are empirically verified on a sample of 136 European luz; among the determinants of urban efficiency improvements, a relevant role is found to be played by the increase in urban functions and the growth of the urban system where each city is located.
Keywords: Static and dynamic agglomeration economies; structural dynamics; urban growth.
Jel Code: R11, R12