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The classic core-periphery model: Myrdal & Friedmann

The classic core-periphery model: Myrdal & Friedmann. Demands from center for goods/services yields payments to periphery. Abundant Labor. Supply of materials and products. Periphery. Center. Scarce Capital. Abundant Capital. Capital flows to periphery.

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The classic core-periphery model: Myrdal & Friedmann

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  1. The classic core-periphery model: Myrdal & Friedmann Demands from center for goods/services yields payments to periphery Abundant Labor Supply of materials and products Periphery Center Scarce Capital Abundant Capital Capital flows to periphery Shortage of labor in center creates stimulus for labor migration from periphery Scarce Labor Supply of labor from periphery will create labor shortage in periphery and raise wages and incomes Adequate Labor Adequate Capital

  2. Backwash Circuits Capital Investment Migration and Employment Capital attracted to center Young workers migrate to center Wider Gap C-P Lack of investment in periphery Aging labor force in periphery Wider Gap C-P Retarded growth in periphery Decreased attraction for new activity Services and Infrastructure Reduced Investment and new jobs in periphery Smaller local market, pur- chasing power Widened gap between C-P Decline in local services

  3. Pred’s Model of Circular and Cumulative Growth Enhanced chance of invention and innovation Entry of new industry or expansion of existing industry Initial Multiplier Effect Attraction of linked industries: forward linkages backward linkages New Construction Activity Expanded Tertiary Sector Expanded Public Utilities New local or regional threshold Secondary multiplier effects Invention or Innovation

  4. The Economic Base Model ET = Total Employment EX = Export Employment EL = Local Employment ET = EX + EL (1) Define a = EL/ET Multiply by ET and substitute into (1): ET = EX + aET Solve for ET: ET = ( 1/1-a)EX

  5. Example, Economic Base Model If a = .67 Then:( 1/1-.67) =( 1/.33) = 3 If EX = 500, then ET = 3 x 500 or 1500. If EX rises to 750, ET becomes 3 x 750 or 2250 and if EX falls back to 400, ET declines to 1200

  6. Regional Input-Output Models Final Demand Total Sales = Total Purchases Total Sales = Intermediate Sales + Final Sales Total Purchases = Intermediate Purchases + Value Added + Imports

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