Session I

INTRODUCTION
Capello 2007
Regional Economics
Kuliah Ekonomi Regional
Sabtu, 19 Januari 2007
D.S. Priyarsono

ECONOMICS AND SPACE (1)

Economic activity arises, grows, and develops in
space.
Productive resources are distributed unevenly in
space.
Space influences the workings of an economic
system.
Regional economics is the branch of economics
which incorporates the dimension space into
analysis of the workings of the market.

ECONOMICS AND SPACE (2)

Neoclassical School has conceived the temporal
analysis of economic development as crucial
and neglected the variable space.
The treatment of the variable space in
economic analysis complicates the logical
framework.
Introduction of the variable space required the
discarding of the simplifying hypothese (always
dear to economists) of constant returns and
perfect competition.

ECONOMICS AND SPACE (3)

Location theory
Deals with the economic mechanisms that
distribute activities in space
Involves investigation into the location choices
of firms and households
Involves analysis of disparities in the spatial
distribution of activities; interprets territorial
disequilibria and hierarchies
Uses concepts of externalities and
agglomeration economies
Physical metric

ECONOMICS AND SPACE (4)

Regional growth theory
Intrinsically macroeconomic
Uniform abstract

Concept of diversified-relational
The bridge and the point of maximum crossfertilization between physical-metric and
uniform-abstract approaches

LOCATION AND
PHYSICAL-METRIC SPACE (1)
Location theory seeks to explain the
distribution of activities in space
Factors influencing location of individual
activities, allocation of different portions of
territory among different types of production,
the dividing of spatial market among
producers, and the functional distribution of
activities in space
Two driving forces: transportation costs and
agglomeration economies

LOCATION AND
PHYSICAL-METRIC SPACE (2)
Location choices of firms
Determined by an endeavor to minimize
transportation costs between alternative locations
under the influence of agglomeration economies

Market areas
The division of a spatial market (location of
consumers) among producers.

Production areas
The economic logic whereby a physical territory (land)
is allocated among alternative types of production

The size of territorial agglomerations, their

functional specialization, and their territorial
distribution.

REGIONAL GROWTH AND

UNIFORM-ABSTRACT SPACE
Explain why growth and economic
development come about at local level:
rich-poor, grow (more-less rapidly) regions
External openness to movement of
production factors.
Space is no more than a physical
container of development and performs a
purely passive role in economic growth.

LOCAL DEVELOPMENT AND

DIVERSIFIED-RELATIONAL SPACE (1)
Agglomeration economies:
Space generates economic advantages
through large-scale mechanisms of synergy
and cumulative feedback operating at local
level.

Development (Perroux)

LOCAL DEVELOPMENT AND

DIVERSIFIED-RELATIONAL SPACE (2)
Diversified-relational space theories
adopted a micro-territorial and microbehavioral approach: their purpose was
not to explain the aggregate growth rate of
income and employment, but to identify all
tangible and intangible elements of growth
process.

TOWARDS CONVERGENCE?
New advanced mathematical tools for
analysis of the analysis of the qualitative
behavior of dynamic non-linear systems
Abandon the hypotheses of constant
returns and perfect competition
Incorporate agglomeration economies into
elegant models of strictly macroeconomic
nature.

THEORIES OF CONVERGENCE
AND DIVERGENCE
Theory of convergence examines the reasons
for diminishing disparities between rich and
backward regions.
Theory of divergence examines the reasons of
the persistence of the disparities.
No grounds for any dichotomy.
Divide theories according to the definition of
space, and the goals implicitly pursued by each
theory