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The article deals with the characteristic of agglomeration effects which are perceived as ones of the factors of development of a certain area (region or municipality). Especially, the article is concerned with localization effects for which the general dynamic model on the basis of system dynamics is created here. Further, this model is simulated for the interval of twenty years. The supposed impact of localization effects on the development of region or municipality is indicated this way. The advantage of this approach is including not only of localization economies into the development of region or municipality but also localization diseconomies. These diseconomies express especially with the growth of costs (e. g. infrastructure costs, wage costs, rents etc.). This situation is characterized by contrary process when the development of region or municipality itself is reduced. The system dynamics so enables to catch all the processes of reinforcing and balanced character at the same time. [ABSTRACT FROM AUTHOR]