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Chapter 3 Global Economic Development. Introduction Nature of Technology, Global Distribution of Technology, Elements in Economic Development World Levels of Development Regional Growth Problems of Development

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chapter 3 global economic development
Chapter 3 Global Economic Development
  • Introduction
    • Nature of Technology, Global Distribution of Technology, Elements in Economic Development
  • World Levels of Development
    • Regional Growth
  • Problems of Development
    • Regional Economic Change, Growth Pole Theory, Circular and Cumulative Causation, The Bell Shaped Development Model
  • Concluding Thoughts and Summary
introduction
Introduction
  • The Nature of Technology

“technology … refers to the application of scientific knowledge and methods to economic activity, resulting in changes in productivity” p. 35

  • The basic problem in engineering economics and management science - defining products/services, and optimal combinations of factor inputs to produce them
  • Component technologies: (1) transport & communications, (2) manufacturing, (3) agriculture, (4) urban-service
  • Energy consumption as an indicator of the stock of technology (Table 3.1); vehicles per capita (Figure 3.2)
elements in economic development
Elements in Economic Development

Cultural Attributes

Population Characteristics

Economic Development

Energy and

Resource Base

Technology

world levels of development
World Levels of Development
  • Figure 3.4
  • Regional Growth: Rostow’s stages of growth model (1) traditional societies,

(2) preconditions for takeoff, (3) takeoff,

(4) drive to maturity, (5) high mass consumption

  • The process of diffusion of development
  • ? Inevitability of Rostow’s sequence?
development the circular model of capital flow
Development: The Circular Model of Capital Flow
  • Interest rates
  • Tax policy & public
  • investment

Stock of Productive

Capacity

Industrial

Output

Final Consumer

Demand

Investment

“Savings”

Business

Income

(Value Added)

Payments to

Households

“Savings” - retained earnings, household savings, institutional

investors, international capital sources

regional economic change initial triggers to development

Regional Economic Change: Initial Triggers to Development

Vance’s model

- contrast of “old model” of endogenic

development (internal growth theory)

- versus “new model” of exogenic growth

Local examples: fur trade

Hudson’s Bay Co trading posts

Oregon Trail settlers

Puget Sound timber trade

Jacksonville OR gold mining

slide10

Vance’s

Exogenic

And

Endogenic

Model

internal development after initial triggers to development

Internal Development after Initial Triggers to Development

Retail and other service functions

? Location relative to export activity?

Crossing thresholds with growth,

substituting local production

for imports, exploiting scale economies

Static versus dynamic relations

impact of scale economies on market division
Impact of Scale Economies on Market Division

B

A

Market Division

Market Division

P

t

P

t

P

P

t

a

a

a

a

I

II

I

II

distance

impact of transport improvement
Impact of Transport Improvement

C

Market Division

P

P

I

II

process of regional specialization
Process of Regional Specialization

Region B

Region A

Initial Condition: No Interregional Trade

Local Production Equals Location Consumption

process of regional specialization continued
Process of Regional Specialization, Continued

Exports to A

Exports

To B

Region A

Region B

Imports from A

Imports from B

process of regional specialization continued16
Process of Regional Specialization, Continued

Interregional Exports

Production for

Local Use

Production for

Local Use

Interregional Imports

perroux s growth pole model

Perroux’s Growth Pole Model

“Growth does not appear everywhere at the same time; it becomes manifest at points or poles of growth, with variable intensity; it spreads through different channels with variable terminal effects on the whole economy.”

Growth Poles versus Growth Centers

Propulsive Industries & Lead Firms

- large size; fast growth; strong linkages; innovative

? Geographic clustering of pole components?

? Use of I/o data to identify poles??

uneven development spatial outcomes at varying scales

Uneven Development: Spatial Outcomes at varying scales

Role of lead industries, growth poles

Regional economic base as a platform for development over time

The outcome of Perroux’s arguments: uneven development, where there is:

(1) a dominant center or core, and

(2) a subdominant periphery

that materializes (a) locally; (b) nationally, (c) globally

core periphery shifting scales

Core-Periphery: Shifting Scales

Global: Nation State Level: Developed-Developing

Urban Perspective: Global Cities (New York, London, Tokyo) - peripheral cities - e.g. Seattle

National: The Industrial NE Vs. the agriculture &

resource dependent South and West

Regional: Seattle & Portland as central-place core cities, rural peripheries

Local: Seattle CBD Vs. lower order urban centers

the classic core periphery model myrdal friedmann
The classic core-periphery model: Myrdal & Friedmann

Demands from center for goods/services

yields payments to periphery

Abundant

Labor

Supply of materials and products

Periphery

Center

Scarce

Capital

Abundant

Capital

Capital flows to periphery

Shortage of labor in center creates

stimulus for labor migration from periphery

Scarce

Labor

Supply of labor from periphery will create labor

shortage in periphery and raise wages and incomes

Adequate

Labor

Adequate

Capital

core periphery model spread effects

Core-periphery Model: Spread Effects

Demands by Center for goods & services; labor movements; capital flows to meet investment needs: ? “Trickle-Down” leading to equilibrium?

BUT:

(1) Distance attenuating effects - related to transportation & communications

(2) Hierarchical impacts with stronger access to resources in higher order places

core periphery model backwash polarizing effects overtake spread effects

Core-Periphery Model: Backwash/ Polarizing Effects Overtake Spread Effects

1. Goods/Service purchase in periphery

(a) inelastic demand for peripheral goods

(historically owned by core industrialists)

(b) Offset by peripheral demand for goods and services produced in the core

2. Migration: historically selective

3. Capital: net flows often favor the core

Result: Convergence, Divergence, Persistent Imbalance

backwash circuits
Backwash Circuits

Capital Investment

Migration and Employment

Capital

attracted

to center

Young workers

migrate

to center

Wider

Gap

C-P

Lack of

investment

in periphery

Aging

labor force

in periphery

Wider Gap

C-P

Retarded

growth in

periphery

Decreased

attraction for

new activity

Services and Infrastructure

Reduced Investment

and new jobs

in periphery

Smaller local

market, pur-

chasing power

Widened gap

between C-P

Decline in

local services

pred s model of circular and cumulative growth
Pred’s Model of Circular and Cumulative Growth

Enhanced chance

of invention

and innovation

Entry of new

industry or expansion

of existing industry

Initial

Multiplier

Effect

Attraction of

linked industries:

forward linkages

backward linkages

New

Construction

Activity

Expanded

Tertiary

Sector

Expanded

Public

Utilities

New local or

regional threshold

Secondary

multiplier effects

Invention or

Innovation