@techreport{NBERw9112,
 title = "From Sectoral to Functional Urban Specialization",
 author = "Gilles Duranton and Diego Puga",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "9112",
 year = "2002",
 month = "August",
 URL = "http://www.nber.org/papers/w9112",
 abstract = {Striking evidence is presented of a previously unremarked transformation of urban structure from mainly sectoral to mainly functional specialization.  We offer an explanation showing that this transformation is inextricably interrelated with changes in firms' organization.  A greater variety of business services for headquarters and of sector-specific intermediates for production plants within a city reduces costs, while congestion increases with city size.  A fall in the costs of remote management leads to a transformation of the equilibrium urban and industrial structure.  Cities shift from specializing by sector -- with integrated headquarters and plants -- to specializing mainly by function -- with headquarters and business services clustered in larger cities, and plants clustered in smaller cities.},
}