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Core-Periphery Models: Distance Counts

Core-Periphery Models: Distance Counts. Chapter 9. Definitions. Urban area Periurban area: rural areas contiguous to urban areas Deep rural areas: distant rural areas within the urban hierarchy that consider that city as a central place for specialized purchases. Land Rent.

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Core-Periphery Models: Distance Counts

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  1. Core-Periphery Models: Distance Counts Chapter 9 1

  2. Definitions • Urban area • Periurban area: rural areas contiguous to urban areas • Deep rural areas: distant rural areas within the urban hierarchy that consider that city as a central place for specialized purchases 2

  3. Land Rent • Land Rent = TR – PC – tD • where TR is total revenue, • PC is the production cost (normal profit included), • t is the marginal transportation cost per unit of distance, and • D is distance. 3

  4. Cost-distance function 4

  5. Bid-rent function 5

  6. Cost-distance functions 6

  7. Bid-rent functions 7

  8. von Thünen’s Concentric circles 8

  9. Concentric circles adjusted for intersecting routes 9

  10. Bid-rent function showing growth of Sector B 10

  11. Product life cycles • Three stages (Vernon 1966) • Innovation Stage • Transition (maturity) Stage • Standardization Stage 11

  12. Innovation Stage: Metropolitan location • Short production runs • Firms require frequent technical guidance. • High-tech industries locate near research centers and universities • Flexible input sources • Swift, accurate communication • Demand often in affluent markets 12

  13. Transition (maturity): Periurban Location • Firms loosely linked with research facilities • Preference for lower land costs near a pool of skilled workers 13

  14. Standardization Stage:Deep Rural Location • Mass production • Benefits from unskilled labor and automation over skilled workers • Benefits from Economies of Scale • Searches for abundant low-paid workers • Rural areas • Overseas 14

  15. Technological determinism • Implies that ideas flow one way down the urban hierarchy • Does this hold? 15

  16. Innovation in center cities • Marshall-Arrow-Romer (MAR) externalities a.k.a Localization Economies • Jacobs externalities a.k.a Urbanization Economies • Patents activity responds more to urbanization than localization economies • Nursery cities 16

  17. Innovation in periphery • R&D jobs follow skilled workers to the suburbs • Entrepreneurs of medium-sized firms prefer suburbs and medium-sized cities • Medium sized cities concentrate on standardized production • Agglomeration economies (localization) 17

  18. Rural innovation • Lack agglomeration economies • If telecommunications infrastructure is well-developed, little difference between rural vs. urban innovation. • Innovation overcomes local constraints • Simplifies production process • Finds markets for local products 18

  19. Growth Poles • Natural growth pole: dynamic element in an economy • Planned (induced) growth pole • Perroux (1956): growth poles are not contiguous to their hinterlands • Boudeville (1966): growth pole is urban center; growth spreads over periphery 19

  20. Growth Poles: Characteristics • a motrice (stimulant, key, leading or propulsive) firm or industry, • backward and forward linkages, • a potential for innovation, • the capability to attain self-sustained growth, and • the capability for growth to spread over the pole’s hinterland. 20

  21. Spread effect • Spread effect—growth at a pole increases demand for goods and services produced at the hinterland • Increases population density of the city and its periphery • Spread through growth • Spread through decentralization • Diseconomies of agglomeration send workers and firms to the periphery 21

  22. Backwash effect • Backwash effect—growth at a pole drains employees and firms from the hinterland into the city • Growth in city causes selective migration of rural population • Settlement sorting: production workers move to smaller cities; white collar workers move to city. 22

  23. Nodal response • Increased demand in the periphery increases growth in the core • Induced effects • Increased demand for natural resources processed at the core 23

  24. Staple Theory of Economic Development • Harold Innis (1956), Canadian Economist • High volatility of regional economies that depend on natural resources. • Growth in world demand for the resource (direct effect) increases support industries (indirect and induced effects) • Sustainability requires diversification 24

  25. Rural economic development • Most likely in counties • Adjacent to metropolitan areas • With sufficient agglomeration economies • Endowed with scenic amenities 25

  26. Rural economic development • Problematic in counties • Shifting from resource-based economy to low-skill, low-wage manufacturing • Where workforce is not well educated • Lacking formal child care • Lacking dependable transportation infrastructure • With high old-age dependency ratio (Chapter 11 appendix) • With bureaucracy or resource ownership that benefits from the status quo 26

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