How do regions change

When the general population encourages these gregarious behaviors, more ideas are exchanged and self-esteem increases. Humans are made to be social beings who tend to form bonds more easily with people who are in the same groups, also known as ingroups to sociologists. Culture plays an important role in shaping the style of communication.

Generally, people react to how we speak rather than what we say. The culture in which individuals are socialized influences the way they communicate, and the way individuals communicate can change the culture.

Aging is responsible for physiologic changes in hearing, voice, and speech processes. Some language skills remain intact, whereas others tend to decline.

Table of Contents. But a focus on change and causality, by which I mean on studying cities and regions as forward-moving development processes—should determine what is most relevant in defining the ambitions of the field. Concretely, then, the field should be able to respond to such questions as: why do regions grow?

Why do some decline? What differentiates regions that are able to sustain growth from those that are not? What are the forces that cause per capita income to converge or diverge, and under what conditions do they operate?

What are the principal regularities in urban and regional growth, and what are the events and processes that are not temporally- or geographically-regular but that affect pathways of development in durable ways? Two branches of spatial economics have developed in recent years. The New Economic Geography NEG emanates from the founding paper of Krugman , whereas the New Neoclassical Urban Economics NNUE evolves from the older traditions in urban economics, offering an ambitious and inclusive set of inter-regional spatial equilibrium models.

The two are substantially different from one another, but both have significant gaps in their ability to explain certain kinds of spatial-economic dynamics. The NEG is principally concerned with production. Scale economies induce the concentration of workers and firms, each enjoying closer contact with its markets and access to a greater variety of inputs and products, if trade costs are even mildly positive Krugman, ; Fujita and Thisse, Moreover, trade costs are fully integrated into this way of thinking, something which was not previously possible.

Trade costs can also have certain endogenous characteristics, because local interactions can generate further scale economies and increase the gap in trade costs between local and far away economic agents Martin and Ottaviano, These are significant achievements, though most of the underlying insights have been around quite a long time. Meanwhile, scholars of cities had long described Marshallian processes of economic agglomeration as the basis of city economies Pred, ; Hall, These earlier thinkers emphasized intermediate linkages, home market effects, and local learning, just as does the NEG today; but they did not did not place their insights in a framework with a consistent view of trade costs, open economy relationships, labour mobility, economies of scale and secure microfoundations.

The NEG thus represents a fundamental leap forward. It attempts to bring into a single framework the behaviours of firms in choosing locations, of individuals and households in choosing residence, and of developers in shaping the built environment.

At its heart are how firms seek to raise productivity and individuals to satisfy their preferences for income, paid amenities and non-monetized amenities. Significantly, the NNUE introduces local politics over land and housing as a key sphere in which the possibilities of firms and individuals are defined, unevenly from one place to another. Migration is made endogenous in this complex geographical force field. The NNUE also represents a sweeping conception of urban and regional dynamics.

The two are substantial rivals with one another. The NEG would explain the rise of Silicon Valley as the effect of a self-reinforcing process of agglomeration stemming from an initial accident; and it would explain high incomes there as the result of massive economies of scale and variety, on one hand, and the skill composition of labour demand in that agglomeration, on the other.

Thus, the NEG centres on economies of scale in production and consumption, and spatial development as a vast checkerboard of monopolistic competition; the NNUE makes very conventional assumptions about the structure of production and consumption that it is divisible , and focuses on optimal preference-satisfying behaviour on the part of firms, workers, households and builders, in a perfect-competition world.

In other words, the spatial sorting mechanisms for people and activity are radically different in the two theories. Both the NEG and the NNUE have potentially important insights about certain aspects of the process of spatial-economic development; but both have substantial gaps in explaining causality and change, and many assumptions of both are unrealistic because they are driven by requirements of theoretical consistency rather than from what occurs in the real world.

The first major substantive limitation of the NNUE is that some of the assumptions employed to explain change are highly improbable. In this view, firms can substitute capital and labour to a significant degree as they choose among different possible locations. A firm can locate in a place with higher relative labour costs by substituting more capital, in the proportions dictated by its production function, but at the same time, it can opt for alternative locations with lower relative labour prices by employing a higher proportion of labour.

Linked closely to this indifference of the firm is that of the individual-as-household or individual-as-worker: it is assumed that there are significant elasticities of money wages for such things as housing size or amenities such as climate and culture, and that these affect the choice of location between regions and not just the choice of neighbourhood within a region.

Firms certainly do choose locations according to the relative prices of factors at different locations; but there is scant evidence that they can be truly indifferent among regions in the way required by this assumption. At any given moment, the demand for capital and labour—as it is distributed among different locations—is driven first and foremost by the semi-fixed factor coefficients of the demanding firms.

In the short-run, then, the economy does not work like a simultaneous substitution system across locations. The NEG takes a different approach. Its big contribution is to place the phenomenon of localization or agglomeration at the centre of the geographical development process.

It does this by introducing scale economies, and allowing factors of production especially labour to be mobile, and then specifies the degree of unevenness of development that will emerge as determined by the interaction of these scale economies with trade costs between firms and between firms and their markets.

The NEG allows for multiple agglomerations within the same industry, even with very low trade costs, by allowing for product variety—a key realistic dimension of the modern economy. The NEG explains cross-hauling intra-industry trade among similarly-developed areas. Gains to trade in NEG come not only from Ricardian specialization, but from the geographically-differentiated productivity gains from agglomeration. Nominal wages can vary due to establishment-level scale, or to the existence of clusters, both of which raise productivity.

The economic equilibria that emerge from this kind of thinking usually involve high levels of unevenness of output and, in some versions, of per capita income. In the long-run, most NEG theorists continue to assume that interregional income convergence will emerge as the result of declining trade costs, allowing greater sorting of production between regions that compete, and due to increasing labour mobility.

But in the NEG this is a much more temporally- and geographically-uneven process than in NNUE, because economies of scale—within and between firms—are a fundamental characteristic of the economy. Moreover, innovation and learning are admitted by some NEG theorists as potential sources of long-run productivity and factor price differences between places, even though they are very difficult to model.

In the NEG, scale economies in production lead to higher productivity and wages in certain places; which, in turn lead to concentration of a variety of goods at lower prices consumer amenities , which in turn lead to a win-win choice for individuals of locating in places with high wages, low prices and high consumer variety.

This canonical core-periphery model is appealing because it describes the reality of high-income city-regions. But it does not explain why people and firms would go to places with both lower wages and less variety of consumer goods or unpriced amenities.

This is where the NNUE counters the core-periphery thinking of NEG by arguing that in some cases people will reduce their nominal wages in the periphery in order to get its better unpriced amenities and cheaper housing, such that sorting over many different types of locations with different characteristics is achieved. The NEG sees wages in the core regions as possibly incorporating a real wage boost from lower consumer prices scale-supported variety and productivity , not a smooth, arbitrage-and-substitution-driven version of spatial equilibrium.

The big picture is completed in NNUE approaches by adding the notion that other sectors of the economy respond to these dynamics, but also—and this is crucial—shape them.

The most important such sector is housing. Housing stocks respond to demand, which in turn depends on whatever is said to determine population growth workers to jobs? Or jobs to workers? However, in NNUE, it is then frequently assumed that the supply of housing will limit potential in-migration, in turn partially determining whether firms can come into a region and create jobs, and in the case where housing supply would limit population growth, the resulting labour force would be limited hence placing limits on expansion of firms , driving up housing prices, nominal wages up and real wages down.

These spatial units may be without precise borders or even commonly accepted regional characteristics and names. Thus, with global climate change, ecosystem and biome patterns will change. Describe the distinguishing characteristics and meanings of several different regions, as exemplified by being able to. Identify and explain the criteria used to define formal, functional, and perceptual regions, as exemplified by being able to.

Describe and explain the changes in the boundaries and characteristics of regions, as exemplified by being able to. Regions are defined by different sets of criteria, and places can be included in multiple regions of different types. Identify and explain how a place can exist within multiple regional classifications, as exemplified by being able to.

Describe and explain the processes that have resulted in regional change, as exemplified by being able to. The quality of the labor supply can be enhanced by a variety of education and training programs and by removal of barriers to occupational mobility and technical change including racial and sex discrimination, restrictive work rules, and job entry requirements.

Local public services, an important input to almost all activities, can be made more efficient and conducive to productivity and amenity. In the next chapter, we turn to a consideration of how these and other ways of influencing regional development are used in the pursuit of objectives involving regional structure and growth. This chapter addresses itself to such basic questions about regional growth and change as the causes of growth, the roles of trade and of the movement of labor and capital, the relation of regional economic structure to growth, and the convergence of regional differentials in incomes and structure.

Processes of regional economic change work through the various types of linkage examined in Chapter 9. In general, vertical linkages are involved in self-reinforcing growth or decline tendencies, whereas horizontal linkages have a stabilizing influence. The simple economic base approach identifies exports as the generator of growth in a region; nonbasic, or local market-serving, activities are assumed to grow only in response to the local demand generated by the export sector and to maintain a more or less fixed ratio to the latter.

With input-output analysis, it is possible to trace the impact of an increase in business receipts from exports or other components of "final demand" on payments and incomes in the region through local spending for payrolls and purchases from other businesses in the region.

The total increase in regional income generated per dollar of initial increase in final demand receipts is the regional income multiplier. The input-output model treats final demand as the initiator of growth and change. Exports are always part of final demand, but the household, government, and investment sectors are sometimes taken at least partially out of the final demand category and treated as responding to regional demands.

A regional economic model in which all growth and change must come from demand and be transmitted through backward linkage is one-sided. A more adequate model would assign major roles to supply factors and forward linkage as well, but input-output analysis is less well adapted to deal with changes originating on the supply side. A still broader multiregional view of the development process focuses on the roles of interregional trade and factor movements. The migration of capital is subject to determinants closely analogous to those affecting labor migration, though the patterns of interest and wage differentials are quite dissimilar, as are the patterns of capital and labor flow.

Interregional trade can serve as a partial substitute for labor and capital flows in equalizing returns to those factors. Flows of labor and capital can either substitute for or complement one another; the substitutive relation exerts an influence toward stability in relative regional growth, while the complementary relationship can be the basis of self-reinforcing and cumulative tendencies. The observed convergence in regional income levels and structures in recent decades is not a universal trend.

Interregional trade as well as labor and capital movements, though commonly promoting convergence, can in some situations have the opposite effect; and technological dynamics can just as well promote divergence as convergence. Large cities have played a crucial role in regional and national economic development, in their capacity as transmitters of ideas and practices from the outside world and also as places where people from diverse parts of the home region or country are brought into close contact and exposed to new institutions and challenges and a wider variety of opportunities.

Innovation has flourished in such a germinating ground. New industries and other activities that started in large cities have historically tended to decentralize at a later stage to play a role in the development of other regions or parts of the region.

Evidence suggests that decentralization is occurring more rapidly in recent years and that the capacity of smaller places to support innovative industries has increased. Convergence of regional incomes. Regional multiplier. Demand and supply leakages. Basic and nonbasic activities. Demand-driven and supply-driven models. George H. Borts and J. Readings in Theory and Applications Cambridge, Mass. Harvey S. Perloff et al. Allen R. Pred, The Spatial Dynamics of U. Urban-Industrial Growth, Cambridge, Mass.

Harry W. A purchased 50 units of output from B. In this fashion, we can derive the rest of the coefficients in Table The figures in Table total direct and indirect effects are derived as follows from the input coefficients in Table Let us denote the outputs of activities A, B, C, and D simply by those letters.

The foregoing equation can be restated more simply as:. This solution "matrix inversion" of the simultaneous equations is laborious for even as few as four equations if done by hand, but it can be done quickly and cheaply on a computer.

The solution is as follows:. These coefficients are entered in the upper part of Table The figures in the lower part of Table are obtained as follows, taking the first figure. From the table of input coefficients Table , we see that households sell. From equation 5 or from the first figure in Table , we see that A must produce 1. Consequently, each unit that A sells to final demand will require purchases by A from households amounting to.

For each unit that B produces, B buys. Similarly for C and D. The total additional sales by households resulting from a one-unit increase of final demand sales by A is therefore. As indicated in the text households may be included as another activity in the intermediate sector if we care to assume that household expenditures are linearly related to household receipts. This first requires filling in some additional cells in Table , and we shall use the following figures:. Table will now appear as follows, using H to denote households, and with all new figures in italics:.

From the figures in the foregoing table, the input coefficients can be calculated in the same fashion as was done for Table The revised version of Table with headings abbreviated and with all new figures in italics will look like this:. Finally, the total direct and indirect effects of an increase in final demand are derived in the same way as for Table The revised table follows. In it all the figures are new. All the ratios are much larger than in the original version of Table , since the new calculation includes a large additional multiplier effect involving feedback through the household sector additional employment induces additional household expenditure for local products, imports, capital, and taxes.

No such effect was allowed for in the original version of Table , in which households were a final demand sector.

It may be noticed that in each column of this last table, the sum of the figures in the primary-sector rows government, outside, and capital comes to 1 ignoring some trivial rounding-off discrepancies.

The same holds true in Table The reader will find it a useful exercise to explain this fact. The areas involved are mapped in Figure We shall sometimes in this chapter refer to the individual Census divisions as "regions," despite the fact that the Census Bureau as shown in Figure groups them into still larger areas, which it calls "Census regions. Contributions to the discussion include Phillip R. Coelho and Moheb A. Hoch, "Income and City Size," p. Exporting in this sense does not necessarily imply that the goods or services are sent out of the region by their producers.

They may instead be consumed in the region by outsiders who occasionally come for that purpose. Selling of recreational and other services to tourists from outside is a major "export" activity in some regions. For a careful and readable description of the purposes and techniques of such studies, see Charles M. For a comprehensive discussion of the methods used to estimate the exports of a region, see Andrew M. In each case, a questionnaire survey of business firms provided the more accurate data against which the location quotient estimate was checked.

More generally, there is an aggregation effect involving the offsetting of "surpluses" and "deficits" that restricts the comparability of location quotients. As a rule, the use of a finer activity classification or a smaller region will make quotients larger, whereas a coarser classification or larger region permits more offsetting and reduces the quotients.

Ibid, pp. For a series of estimated export multipliers for a dozen cities of assorted sizes, see Charles L.

See J. Regions Middletown, Conn. The example to be given here is the simplest input-output table applicable to a region.

For many years input-output tables constructed for the country as a whole were of identical form. With the completion of the U. See Bureau of Economic Analysis, U. In practice, the entries involving this sector comprise sales to and purchases from firms both inside and outside the region on capital account.

The "outside world" entries refer to export or import transactions with nongovernmental parties on current account. For an explanation of the calculations, see Appendix or any general reference on input-output analysis, such as William H. For any table of substantial size, such calculation is best done on a computer.

So far, we have a whole set of specific regional multipliers, since the assumed initial impact that gets multiplied can be taken as an increase in final demand sales of any of the several intermediate sector activities.

Sometimes it is desirable to settle on a single overall regional multiplier figure. The last column in Table illustrates this calculation, giving an overall multiplier of 1.

These and other types of regional multipliers have been estimated at different times for many regions. Although, as we might expect, there is considerable variation, there is a rather consistent tendency for multipliers to be greater for larger and more fully diversified regions. This is logical: Such a region "takes in more of its own washing," and the sequence of indirect and induced effects is subject to less demand leakage than would be the case in a smaller or more narrowly specialized region.

Presumably, the minimum multiplier 1 would be most closely approached in a community, such as a mining camp, devoted to a single exporting activity. In a comparative study of export employment multipliers in American cities, it was found that the following characteristics were associated with higher multipliers: city size, growth rate, female labor force participation, income per capita, ratio of nonlabor to labor income, and diversity of activities.

Andrew S. There are alternative ways of allowing for the multiplier effect via household income and expenditure. In any case, it is customary to refer to this effect as "induced" to distinguish it from the indirect effects resulting from interindustry transactions in the narrower sense. There is a large literature on systems of regional accounts and models for analysis and policy guidance; for a well-rounded treatment, see Harry W. See, for example, Karen R. Polenske, The US. Probably one reason for this overemphasis on the role of demand in regional growth is that modern regional growth theory, input-output analysis, and multiplier analysis were influenced by the contemporary development of Keynesian theories of what determines the degree of utilization of given resources in the short run.

A more balanced approach, taking into account long-term growth factors on both the supply and the demand sides, has appeared in some theoretical work; notably in Horst Siebert, Regional Economic Growth: Theory and Policy Scranton, Pa. One of the first regional economists to question the primacy of exports and call for a balanced theory was Charles M.

His article was prompted by a forceful statement of the export doctrine by Douglass C. Another good statement emphasizing supply factors is Richard T. See, for example, Richard F. Muth, "Migration: Chicken or Egg? Readers interested in a more detailed presentation and critique of supply-driven input-output analysis are referred to Frank Giarratani, "The Scientific Basis for Explanation in Regional Analysis," Papers and Proceedings of the Regional Science Association, 45 , ; and Oosterhaven, Interregional Input-Output Analysis, Chapter 8.

Additional material on changes in the geographic structure of the U. Moheb A. See Michael P. See Harry W. Richard A. See Jeffrey G. Needleman ed. Williamson presented and substantiated the hypothesis described here, using nineteenth-and twentieth-century data for a number of countries both cross-sectionally and in terms of changes over time. He also investigated the degree of income inequality among counties within states in the United States and established that its changes have been closely correlated with changes in interstate income inequality.

For a penetrating and well-documented analysis of the interaction between industrial innovation and urban concentration in the United States, see Allen R.

Pred's analysis covers the period up to , and as he suggests, the nature and strength of some of the cumulative forces of urban-industrial agglomeration have subsequently changed. His study is noteworthy in its stress on the interaction between concentration and innovation: That is, technological advance and innovation flourish in the large urban-industrial center, and give rise to new industries that are established in those same centers, and stimulate their further growth.

There are many examples of this process in the nineteenth century: the inception of the electrical equipment manufacturing industry in New York, Boston, and Pittsburgh, the making of scientific instruments and optical equipment in Rochester, N. But as Pred points out under more recent conditions, innovation at one location can as easily give rise to new industry in other locations.

This is true because technical knowledge is much more diffused and transferable now, and also because large multiplant and multi-industry corporations now play a commanding role in the research and development that give rise to new processes and industries.

Such a corporation is perfectly free to choose locations for the new industry quite remote from the headquarters or research-center city. This and other changes help to explain why specific manufacturing industries are no longer as strongly or persistently concentrated in their "parent cities" as they used to be; and perhaps also, why the fastest-growing metropolitan areas today are not the very largest but those in the intermediate and smaller size classes. See Section 8.

As a sobering touch of historical realism, we must note here that leading cities in which wealth, power, and foreign influence are concentrated have not always been an unmixed blessing to their regions and countries. In some situations of old-style colonialism in particular, the dominant externally oriented metropolis has been parasitic on its hinterland. Preexisting native industries, economic and social institutions, and cultures have been damaged to an extent that, for a considerable period at least, is not compensated by the growth-generative effects.

Wilbur R.