Core-Periphery Models: Distance Counts
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Core-Periphery Models: Distance Counts
Chapter 9
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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
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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.
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Cost-distance function
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Bid-rent function
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Cost-distance functions
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Bid-rent functions
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von Thünen’s Concentric circles
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Concentric circles adjusted for intersecting routes
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Bid-rent function showing growth of Sector B
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Product life cycles
• Three stages (Vernon 1966)– Innovation Stage– Transition (maturity) Stage– Standardization Stage
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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
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Transition (maturity): Periurban Location
• Firms loosely linked with research facilities
• Preference for lower land costs near a pool of skilled workers
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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
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Technological determinism
• Implies that ideas flow one way down the urban hierarchy
• Does this hold?
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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
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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)
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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
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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
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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.
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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
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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.
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Nodal response
• Increased demand in the periphery increases growth in the core– Induced effects– Increased demand for natural resources
processed at the core
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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
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Rural economic development
• Most likely in counties– Adjacent to metropolitan areas– With sufficient agglomeration economies– Endowed with scenic amenities
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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