Growth Theory Background

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Growth Theory Background
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What Constitutes a Region ?

• a geographical area constituting an entity
• general consciousness of a common regional
  interest making possible some rational collective
  efforts to improve regional welfare
• a high degree of correlation of economic
  experiences of the regions sub-areas and
  interest groups.

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Complementary Relationships

• The locational effect is mutual attractionthat
  is, an increase of one activity in a region
  encourages the growth of a complementary
  activity.
• Mutual Attraction Among Suppliers Example
  Furniture Manufacturing in N.E. Mississippi.

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Distinguish two different types of regions

• Homogeneous Region
• Functional Regions

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Homogeneous Region

• A homogeneous region is demarcated on the basis
  of internal uniformity.

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Examples include

• The winter wheat belt in the central part of the
  United States is a homogeneous agricultural
  region because all its parts grow the same main
  crop in the same way.
• Basis of a common syndrome of poverty, arrested
  economic development, and limited human
  opportunity.
• A homogeneous zone or neighborhood within an
  urban area (such as a ghetto or other ethnic
  area, a wholesaling district, or a wealthy
  suburb).

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Functional Regions

• Areas defined by business and economic activities
  and linkages
• Nodal
• Non Nodal

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Examples of Specific Linkages

• ? Where, how far, and how often do you and your
  family travel to shop for clothes and household
  items?
• ? Where, how far, and how often do you and your
  family travel for recreational purposes (e.g.,
  fishing, hunting, boating, camping, and skiing)
  or cultural purposes (e.g., movie-going, parties,
  and museum visits)?
• ? Where, how far, and how often do you and your
  family travel on long vacations?

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Examples of Specific Linkages

• ? Where did your family buy its last car? How
  far did you travel to buy it? How often does your
  family make such a purchase?
• ? How many customers does the local television
  cable system serve, and what is the geographic
  extent of the service area?
• ? How many planes fly in and out of the local
  airport each day? What cities do they come from?
  Where do they go? (Trains, ferries, and subway
  systems would be alternate focuses for this type
  of question.)

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Examples of Specific Linkages

• ? How many customers does the local Internet
  service provider serve, and what is the extent of
  the local service area? How many calls are made
  into the system on a daily basis? Students may
  also want to research how many local citizens
  subscribe to regional or national Internet
  service providers.
• ? How many subscribers does the local newspaper
  serve? What is the geographic extent of the
  newspaper's distribution?
• ? How many sports games or meets (e.g.,
  basketball, soccer, volleyball, track,
  cross-country, wrestling, swimming, football, or
  gymnastics) does your school participate in each
  season or year? How far do teams travel for games
  and meets?

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Examples of Specific Linkages

• ? How many people come to the closest regional
  mall to shop on any given weekend? From where do
  they come? How large is the geographic area
  served by the mall?
• ? How much e-mail have you received this week?
  How would you classify it (e.g., within the
  school system, within the community, within the
  state, within the U.S., or international)?
• ? How many new students came to the local school
  this year? From what communities did they move?
  How many students have left the school system
  this year? Where did they go?

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Nodal Regions

• a special case of a functional region
• has a single focal point
• the notion of dominance or order is introduced.
• The grouping is based upon both interactions
  between locational entities and the rank or order
  of one locational entity to another
• a single locational entity is identified as
  dominating all others,
• A city and its surrounding commuting and trading
  area make a nodal region.

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A city and its surrounding commuting and trading
area make a nodal region.
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RELATIONS OF ACTIVITIES WITHIN A REGION

• vertical relationships
• horizontal relationships,

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vertical relationships

• outputs of one activity are inputs to another
  activity
• transfer costs are reduced by proximity of the
  two activities
• the presence of either of these activities in a
  region enhances to some degree the regions
  attractiveness as a location for the other
  activity
• vertical linkages normally imply mutual
  attraction.

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vertical linkages

• We can distinguish between vertical relationships
  where the linkage is predominantly "backward" and
  cases in which it is predominantly "forward."

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Backward linkage

• Backward linkage means that the mutual attraction
  is important mainly to the supplying activity (a
  market-oriented activity is attracted by the
  presence of an activity to which it can sell.
  This involves transmission of an effect to an
  activity further back in the sequence of
  operations eg. Retail establishments exist
  because of customers)

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Forward linkage

• Forward linkage means that an impact of change is
  transmitted to an activity further along in the
  sequence of operations (an activity using
  by-products from another activity is involved in
  a forward linkage e.g.,glue factory locates near
  meat packers)

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horizontal relationships

• Involve the competition of activities, or units
  of activity, for either markets or inputs.
• The locational effect is mutual repulsion
• There tends to be a rivalry of different
  activities for scarce and not easily expansible
  local resources (such as particular varieties of
  labor, sites on riverbanks or with a view, clean
  and cool water, or clean air).

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Horizontal linkages lead to questions of regional
policy

• Should local government let the regions water
  and waterside sites be preempted and polluted by
  water-using industries or to reserve them in part
  for residential institutional, or recreational
  use.
• Should regional efforts to enhance employment
  opportunities take the form of trying to attract
  new activities with the largest number of jobs,
  regardless of character, or should priority be
  given to new activities that pay high wages,
  provide opportunities for individual learning and
  advancement, and attract a superior grade of
  in-migrants?
• Should a communitys last remaining tract of
  vacant level land be given over to an airport, a
  strip-mining operation, a high-class low-density
  suburban development, a low-income housing
  project, a missile-launching site, or an
  industrial park?
• How much smoke is the community willing to
  tolerate for the sake of the income earned by the
  smoke producers and the taxes they pay?

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Complementary Relationships

• The locational effect is mutual attractionthat
  is, an increase of one activity in a region
  encourages the growth of a complementary
  activity.
• Mutual Attraction Among Suppliers Example
  Furniture Manufacturing in N.E. Mississippi.

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REGIONAL SPECIALIZATION

• The growth of a region and the kinds of
  opportunities it provides for its residents
  depend to a large extent on the regions mix of
  activities.
• We can characterize regions as being more or less
  narrowly specialized in a limited range of
  activities, or as being more or less diversified
  or "well rounded."

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Quantitative Measures of Specialization
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location quotient

• The location quotient is most frequently used in
  economic geography and locational analysis, but
  it has much wider applicability.
• The location quotient (LQ) is an index for
  comparing an area's share of a particular
  activity with the area's share of some basic or
  aggregate phenomenon.

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Suppose, for example, that the following data are
taken from a larger data set which details the
employment structure of a region divided into
four areas
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Calculating the Location Quotient

• A ratio of ratios
• Measures the spatial distribution of one variable
  relative to another within a geographical entity
• Employment within the region relative to
  population
• Two mathematically equivalent forms
• Employment share divided by population share
• (E county / E region) / (P county / P region)
• Employment per capita, county relative to region
• (E county / P county) / ( E region / P region)

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For Industry a in the East Region
LQa(600/6000)/(2850/21000).74
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The Logic of Location Quotient

• If a location quotient equals to 1 then the
  industry's share of local employees is the same
  as the industry's share nationally.
• A location quotient greater than 1 means the
  industry employs a greater share of the local
  workforce than it does nationally, produces more
  goods and services than are consumed locally,
  which are exported.
• A location quotient less than 1 implies that the
  industry's share of local employment is smaller
  than its share of national employment.

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• The selection of the base or standard
  distribution used in the denominator of location
  quotients is subject to choice.
• Usually, if the activities are part of some
  aggregate, then the aggregate is used as the
  base.

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coefficients of localization (or concentration)

• A simple method of determining the extent to
  which an industry is localized compared with the
  spatial (multi-regional) distribution of all (or
  at least a larger set of) economic activities.
• The coefficient is calculated by subtracting for
  each region the percentage employment share of
  the industry in question from the total regional
  employment share (the region's share of national
  employment in all activities).
• The sum of the positive (or the negative, not
  both) deviations, divided by 100 represents the
  coefficient (potentially varying between 0 and
  1).

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Localization of an Industry
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Coefficient of Specialization see Hayter, p.435

• This coefficient is calculated just like the
  coefficient of localization, except that regions
  become industries and industries become regions.

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Specialization of a Region
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Growth theories

• Simple Neoclassical (supply side, production
  function based)
• Demand side Export Base
• Cumulative Causation
• Dualism Core/Periphery

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Neoclassical

• Output is a function of Capital and Labor
• More advanced theories recognize importance of
  human capital and technology (endogenous and
  exogenous)
• Relies on market mechanism
• Demand is not important

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Export Base

• Production is a function of exports from the
  region
• Local activity is a function of export activity
• Demand based
• Ignores supply

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Some Interrelated Concepts

• Cumulative Causation
• Agglomeration economies
• Industrial clusters
• Growth pole versus growth center
• Core/Periphery

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Cumulative Causation

• Myrdal 1957, Economic Theory and Underdeveloped
  Regions.
• Process in which change in one direction may
  reinforce other tendencies for change in the same
  direction.
• Part of Myrdals underlying belief that
  disequilibrium growth development patterns are
  common

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Myrdal on Cumulative Causation

• In the normal case, there is no tendency toward
  automatic self-stablization in the social system.
  
• The system is not by itself moving towards any
  sort of balance between forces, but is constantly
  on the move away from such a situation.
• In the normal case, a change does not call forth
  countervailing changes, but, instead, supporting
  changes which move the system in the same
  direction as the first change but much further.

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Myrdal on Cumulative Causation

• Because of such circular causation, a social
  process tends to become cumulative and often to
  gather speed at an accelerating rate.

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Agglomeration Economies

• Cost reductions that occur because economic
  activity is carried on at one place.
• A possible influence in cumulative causation
• A reason for central places

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Industrial Clusters

• the tight connections that bind certain firms and
  industries together in various aspects of common
  behavior, e.g., geographic location, sources of
  innovation, shared suppliers and factors of
  production, and so forth.

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Growth Poles vs Growth Centers

• The theory and policy of growth centers was
  developed in Europe and particularly in France,
  in the 1950s, before attaining much currency in
  the United States.
• The broader term "growth poles" does not always
  have a spatial meaning and based on the work of
  François Perroux. In the US such research
  currently goes on under the label of 'clusters'.

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How Growth Centers Work

• Spread Effects  try to establish an impetus for
  development in a particular area
• Backwash Effects  Forced Concentration  of
  resources in a particular area does not spread
  out,  just consolidates within that area

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Core/Periphery

• The core is more advanced, processes raw material
  and obtains high value added
• The periphery provides raw material (low value
  added) to the core and buys finished goods from
  the core
• The periphery is dependent on the core.

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An Eclectic View of Growth

• Supply and demand both matter
• Cumulative causation plays a role
• Dualism does happen
• We dont live in a perfectly competitive world

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