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The City Network Paradigm: Measuring Urban Network Externalities

Dipartmento di Economia, Universita del Molise and in the Dipartimento Economia e Produzione, Politecnico di Milano, Piazza Leonardo da Vinci 32, 20133 Milano, Italy, RobertaCapello{at}polimi.it

In recent years, network behaviour has been analysed extensively as the emerging model for economic growth. By network behaviour, a metaphor for co-operative behaviour among individuals, corporate or territorial partners is intended. This is increasingly becoming the reference paradigm in an era of continuing innovation and fast technological change, in the presence of 'market failure' where dynamic and innovative behaviours are concerned and of the high costs of a growth strategy based solely on internal know-how. The theory of the city network paradigm claims that, through participation in the network, cities exploit scale economies in complementary relationships and synergies in co-operative activities. In this sense, network advantage is a real club good, achieved only by those economic actors who are partners in the economic and spatial network, and is distributed among partners despite the private marginal costs each partner bears to participate in the network. In this sense, the private marginal costs of network participation differ from private marginal benefits, and network advantages turn out to be network externalities. The aim of the present paper is to measure the impacts that city network behaviour has on city performance-i.e. to provide a quantitative measurement of network externalities stemming from network behaviour in territorial systems.

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