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

• 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.

Cost-distance function

Bid-rent function

Cost-distance functions

Bid-rent functions

von Thünen’s Concentric circles

Concentric circles adjusted for intersecting routes

Bid-rent function showing growth of Sector B

Product life cycles

• Three stages (Vernon 1966)– Innovation Stage– Transition (maturity) Stage– Standardization Stage

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

Transition (maturity): Periurban Location

• Firms loosely linked with research facilities

• Preference for lower land costs near a pool of skilled workers

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

Technological determinism

• Implies that ideas flow one way down the urban hierarchy

• Does this hold?

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

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)

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

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

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.

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

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.

Nodal response

• Increased demand in the periphery increases growth in the core– Induced effects– Increased demand for natural resources

processed at the core

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

Rural economic development

• Most likely in counties– Adjacent to metropolitan areas– With sufficient agglomeration economies– Endowed with scenic amenities

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