1 London School of Economics Department of Geography and Environment Michaelmas Term 2004

GY 300: THEORIES OF REGIONAL ECONOMIC DEVELOPMENT

Instructor: Michael Storper, Professor of Economic Geography Office: G408 email: m.storper@lse.ac.uk telephone: 020 7955 6550

Course Description: Over the last few decades, major changes in the world economy have altered conditions for economic growth at regional, national, and international levels. These events demand re-examination of theories and models of the location of economic activity and the growth of territorial economies. Just a few years ago, the debate in many countries centered on a supposed shift from "Frostbelt" to "Sunbelt" and in the world on a "New International Division of Labor." Today, we speak of a new "knowledgebased" economy, and of globalization, as parallel processes that are transforming the nature of the economy and its geography. In this class, therefore, we will examine the theories used to account for territorial patterns of economic development, principally in the context of the developed economies of the United States, Western Europe and Japan, but making frequent references to Latin America and other less developed economies. The class will give students the basic toolkit needed to think about such issues as: why industries locate where they do; why there are tendencies toward geographical concentration and dispersion of economic activity; the reasons why economic activity concentrates in cities and metropolitan areas; why it leaves those areas; how existing trends toward globalization are affecting these processes; whether regions win or lose when they come into contact with other regions or nations; whether regions tend to become more similar or remain different in the process of economic development. Students will learn the basic models for explaining these processes. The course is thus the first step in being able to think about urban and regional economic development coherently, and will enable students to go on to more specialized courses.

Readings: A course study pack will be published and available for purchase. The Krugman and Obstfeld readings are not available in the reader, however. You can get them by purchasing a copy of their textbook, 1

2 Krugman, Paul and Obstfeld, Maurice, International Economics: Theory and Policy, which is widely available. Any edition will do.

COURSE OUTLINE

I. INTRODUCTION: THE PROBLEM Week 1: The Inconstant Geography of Capitalism: Industrialization and Technological Change as the Motor Processes: From the Old Economy to the New Economy and Its Geography

Storper, M. and Walker, R, 1989, The Capitalist Imperative: Territory, Technology and Industrial Growth, Oxford: Blackwell, Introduction and chapter 1.

II. THEORIES OF LOCATION, TRADE AND REGIONAL DEVELOPMENT

Week 2:

Comparative Advantage and Interregional Equilibrium Storper and Walker, chapter 2. North, D. "Location Theory and Regional Economic Growth." Journal of Political Economy, 63: 243-258, 1955. Krugman, P and Obstfeld, M, 2002, International Economics: Theory and Policy. New York: Harper-Collins. Read first two sections of chapter 2: Labor Productivity and Comparative Advantage: the Ricardian Model and Chapter 4: Resources and Trade: the Heckscher-Ohlin Model.

Week 3:

The New Economic Geography and Trade Theory: trade costs, economies of scale, and imperfect competition processes in geographical space Krugman and Obstfeld: chapter 6: Economies of scale, imperfect competition, and international trade.

3 Week 4: Unequal Exchange: the Marxist Variant: an interesting metaphor but with little explanatory capacity Mandel, E., Late Capitalism, chapter 2: "The Structure of the Capitalist World Market." London: New Left Books, 1975. Krugman and Obstfeld, chapter 2. Read the sections on Misconceptions about Comparative Advantage and Comparative Advantage with Many Goods.

III. THEORIES OF LOCALISATION AND DISPERSION Week 5: Agglomeration I: Growth Poles and Industrial Districts Storper and Walker, chapters 3, 4, and 5. Perroux, F., "Economic Space: Theory and Applications." Quarterly Journal of Economics, 64, February 1950. Perroux, F., "Note on the Concept of Growth Poles." IN: Regional Economics: Theory and Practice, edited by David McKee, Robert Dean, William Leahy, New York: The Free Press, 1970. Week 6: Agglomeration II: Circular and Cumulative Causation, Uneven Development, and the Relationship to the Theory of International Development. Myrdal, G., Rich Lands and Poor, chapters 1-5, 11 New York: Harper and Brothers, 1957. Kaldor, N., "The Case for Regional Economic Policies." Scottish Journal of Political Economy, November 1970. Scott, A., Metropolis, chapter 10: "Urbanization and the Spatial Division of Labor." Berkeley: University of California Press, 1988. Easterly, William, 2002, The Elusive Quest for Growth: Economists Adventures and Misadventures in the Tropics, Cambridge, MA: MIT Press, 2002, chapter 8: Tales of Increasing Returns: Leaks, Matches and Traps. Week 7: Agglomeration III: City Systems and Export-Base Theory

4 Tiebout, C., "Exports and Regional Economic Growth." Followed by North, D., "A Reply," and Tiebout, "Rejoinder." Pred, A., City-systems in Advanced Economies, chapter 3: "Present Processes of Change: Multilocational Organizations and the Interurban Transmission of Growth." New York: John Wiley and Sons, 1977. Week 8: Agglomeration IV: Growth, Sectoral Change and Interregional Shifts Scott, A. and Storper, M., "High Technology Industry and Regional Development: A Theoretical Critique and Reconstruction." International Social Science Journal, 112 , 1987. Scott, A., Metropolis, chapter 9: "The Frontiers of Industrial-Urban Development: The Rise of the Orange County High Technology Complex, 1955-1984." Berkeley: University of California Press, 1988. Week 9: Deagglomeration and Dispersal I: Vertical Integration and Product Cycles Norton, R., and Rees, J., "The Product Cycle and the Spatial Decentralization of American Manufacturing." Regional Science, v. 13, 141-151, 1979.

Week 10:

Deagglomeration and Dispersal II: Spatial Divisions of Labor Storper and Walker, chapter 7.