Models and TheoriesLocation and Development

Keller2009

Location Theories and Industrial Location

•Location Theory

•Any theory used to predict where businesses will or should be located.

Vocab

•Range – How far will people travel to purchase good/service

•Threshold – Number of people needed to support business

All location theories deal with:•Variable costs – energy supply, transportation expenses and labor costs.

•Friction Distance:

•Increase in time and cost that usually comes from an increasing distance from your market.

• ( Distance Decay)

•Factories will be concerned with serving the needs of nearby markets, rather than those farther away.

Christaller’s Central Place TheoryDefinition: • Market areas (places of buying and selling) are arranged in

a regular pattern (meaning they are predictable).• The larger the settlement, the farther it is from another

large settlement• The smaller the settlement, the closer it is to other smaller

settlements AND probably a larger settlement• Larger settlements are important because they provide

goods and services not available to smaller settlements• When drawn, it looks like a hexagon

Christaller’s Central Place Theory

Why the Theory?• The purpose of the theory is to show patterns

in settlements, to help us understand the relationship and interactions between larger and smaller settlements

Most importantly: it helps producers find out where the most profitable location to start or run a business would be – the bigger the settlement, the more likely the business will do better, right?

Central Place Theory Model

Weber’s Model•Developed a model for the location of manufacturing plants•Least Cost Theory

•location of manufacturing plants are located in terms of the owners desire to minimize three categories of costs:

1. Transportation

2. Labor

3. Agglomeration – large number of same/interdependent companies in one area

Hotelling’s Model•Locational interdependence

•Location of an industry can not be understood without reference to the location of other similar industries

• For Example:

•Why McDonald’s, Burger King, and other Fast food restaurants are all located close to each other.

Losch’s Model•Profit maximation is emphasized.

•Is the business in the best location in order to make the most profit?

•This would be an ongoing model, as other companies develop or go out of business you would have to adjust.

Development Models and Theories

• These theories deal with why and how countries have or have not developed

• No theory or model is perfect, but it explains some parts of the whole

Rostow’s Development Model• 5 stage mode of development

– Traditional society – not yet started development• Lots of ag, lots of money allocated to military and religion

– Pre-takeoff - elite group initiates changes• Begins to invest in infrastructure like water, transportation etc

– The Takeoff – rapid growth into a few activities (textiles or food)• These develop while rest of country is still traditional

– Maturity – modern tech moves from takeoff industries to others• Rapid growth and workers become more skilled

– Mass consumption – from heavy industry to consumer goods• From steel and energy to vehicles and refrigerators

Assumptions Made• Assumptions– All countries will have similar developmental

trajectories– Intrinsic factors such as natural resources and

culture will not affect development– Countries that undergo development at different

times in history will undergo the same processes– All countries will have the same access to

development– The natural goal, path, and purpose of all

economies is to increase productivity and material consumption

Dependency Theory

• This theory basically says that certain regions and countries control and limit the development possibilities of poorer countries

• Examples– Colonialism– Currency tying (dollar)

• The DT has little hope for development – some say this is too pessemistic

World-systems Theory• Immanuel Wallerstein• Three tiered system: core, periphery, semi-

periphery levels– Core – dominant in the global economic game• Activities generate wealth for that country

– Periphery – dependent on core regions and do not have much control over their own affairs• Activities generate little wealth for that country

– Semi-periphery – has a little of both. Some control over own affairs but still heavily influenced by core