information:extraction
Source of economies

The second contribution to localization economies is the access to specialized goods and services provided for clustering firms. This access to specialized goods and services is known as an intermediate input. It provides increasing returns on scale for each of the firms located within that area because of the proximity to available sources needed for production. If intermediate inputs are tradable, a core-periphery notion will have many firms located near each other to be closer to their required sources. If there are tradable resources and services nearby but no related industries in the same area, then in that case, there are no networking linkages, which makes it difficult for all firms in the area to obtain resources and increase production. The decreased transportation costs associated with the clustering of firms lead to an increase in the likelihood of a core-periphery pattern; the result will be that more intermediate inputs will be focused at the core and, therefore, will attract more firms in related industries.