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Summary Dynamics in economic geography, ISBN: 9789046903704 Location In A Globalised World (GEO2-3803) 2021 $5.94
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Summary Dynamics in economic geography, ISBN: 9789046903704 Location In A Globalised World (GEO2-3803) 2021

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  • Course
  • Location In A Globalised World (GEO23803)
  • Institution
  • Universiteit Utrecht (UU)
  • Book
  • Dynamics in economic geography

This is a summary of Dynamics in economic geography, all of the chapters are covered in-depth, there are a lot of graphs and figures included. Useful summary for exam preparation :)

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  • Yes
  • March 16, 2021
  • 33
  • 2020/2021
  • Summary

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  • geo2 3803
  • minor in geography
  • whole book covered
  • graphs
  • figure

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  • Universiteit Utrecht (UU)
  • Economics And Business Economics
  • Location In A Globalised World (GEO23803)
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Location in a globalized world notes from the book Dynamics in economic
geography – Oedzge Atzema (2014)


Week 1
Chapter 1 – application possibilities for economic geography

1.1 Rediscovery of economic geography

Most renewed views in economic geography are aimed at policy development

Climate and location play a significant role in explaining differences in wealth, but are not all
determining factors

Silicon Valley – example of Schumpeter creative destruction

Why Silicon Valley cannot be easily replicated:
- A continual influx of highly trained engineers
- An enterprise culture with no fear of failure
- Ample venture capital available
- A government policy creating the right growth conditions.

1.2 Location, distance, networks

Two approaches in economic geography – Crevoisier (1999)- Economics shaped by regions
Homogenizing- classical and neoclassical theory, focus on finding regularity and patterning,
ignores historical and spatial deviations from the theory
Particularizing – focus on finding explanations for the particular and unusual embracing
temporal and geographic deviations


Location – matter of physical location (costs) and size of agglomeration (benefits)

Contrary to O’Brien and Friedman, Ghemawat did not believe the rise of the Internet had
drastically changed the importance of distance. Rather than restricting the scope of the
concept to physical distance, he distinguished four dimensions: geographic, cultural,
administrative and economic distance.

Ghemawat thinks that cultural and administrative distance has a stronger effect on
international trade than geographic distance

Summarizing the force of economic geography, prominent economic geographer Ron
Martin said it applies insights from economics, political science, sociology and psychology to
what actually takes place in physical space

Friedman 2005 – symbol of new age- the internet

Shift from regional to global competition

, 1.3 industry and environment

Globalization – lower transaction costs à increased specialization and fragmentation of the
production

‘functional’ and ‘spatial’ – restricted to factors that influence why an economic activity
located in the particular place

Marc de Smidt – production environment as s ‘all the external conditions that influence
both the decision to locate a business in a particular place and how it subsequently
functions’

We can see to aspects that characterize economic geography i.e. location choice and
regional development




Soft location factors – look and feel of premises, the quality of the surrounding area,
reputation of the region

Importance of soft location factors depends on the type of activity

Most sensitive to soft location factors are
- Sales
- Consultancy
- Shared services

, Week 2

Chapter 2 – Classical and neoclassical location theory

2.1 - introduction

Location theory – generally an economic issue faced with constraints

Assumption to all theories- sellers aim to maximize profits (constrained by costs), buyers
aim to maximize utility (constrained by income)

Classical location theory- strong focus on spatial variation, in cost of production and
transportation factors.
Neoclassical theory - also takes spatial variation in profits into account

2.2 – classical economics: minimal cost

Adam Smith in The Wealth of Nations (1776) laid the foundations of classical theory
- Each type of supply creates its own demand
- Availability of factors of production- determine opportunities for industry
- Entrepreneur allocation problem- maximum production minimum cost, geographical aspect:
cost vary pe location

Von Thunen – agricultural land use
Alfred Weber- industrial location choice


2.2.1 Agricultural land use according to Von Thunen

Classical location theory
- Perfect competition on the markets
- Fixed prices
- Competition based on costs
- People are fully informed and act rationally – “homo economicus”
- World – “isotropic space” – no geographical barriers (mountains, rivers)
- Deductive – look at commonalities
- Choose location with the lowest overall cost

Von Thunen theory
- Land use changed as the distance to market increased
- Expensive land cultivated differently than cheap land, cost of transport added to the market,
this determines the land use
- Additional assumptions:
• Space is isotropic: flat and boundless, with no natural barriers. Natural resources and
climate are the same everywhere.
• Land is uniform: farmers can have the same animals and grow the same crops anywhere
• There is one single market: the nearest town or village.

,• Transport costs vary per product.
• Transport costs increase linearly as the distance to the market increases.
• There is one single mode of transport: all products are taken to the market by ox-drawn
cart.
• The return per hectare is the same for all the crops in the area.




W – profit
VM – market price – [fixed by Von Thunen (due to perfect competition)]
P – production cost
T – transport costs

Profits (W) decrease as the distance increase due to transportation cost – at one point it not
feasible to grow that crop – other crop will be grown

Due to isotropic space, ability to see concentric circles representing agricultural land use

Von Thunen model still applies today,’ distance to market explains one-third of the variation
in farm value’

, 2.2.2 Industrial location according to Alfred Weber

Weber’s theory
- Aim to keep minimal transport costs
- Spatial variation in cost of labor and benefits of scale
- Isotropic space
- Raw materials are unevenly distributed
- Finished products are sold in a single marketplace (town/city)
- Labor is not mobile, but its available everywhere
- Transport costs for raw materials and finished goods are based on the weight of the goods
and the distance they are transported
- Transport cost increase linearly as distance increases
- Perfect competition

Factors determining location (Standort factors):
3 criteria

1. Applicability
- General location factors (transport costs, accessibility) apply to every type of business ,
specific location factors apply to certain type of businesses (availability, cooling water)

2. Nature
- Natural technical location factors- infrastructure
- societal cultural location factors- regional development support from the central
government
3. Functionality
- Regional effects- availability of functional resources
- Economies of agglomeration - the cost benefits thanks to the spatial concentration of a
variety of industries

Deglomeration -> result of diseconomies of agglomeration – cost incurred due to clustering
of a range of industrial sectors. E.g. traffic congestion

, Raw materials – important role in Weber’s location theory (2 types)

Ubiquitous material
- can be found anywhere e.g., oxygen, water, internet
- not relevant as location factor
- these materials attract businesses to the market

Localized material
- locally available raw material – coal, oil fields
- location of business depends on weight loss in the process
- a lot of weight loss – businesses tend to locate closer to raw resources
- little weight loss- the location of business is not that important


Location triangle




Three points: market (M), raw material 1 (G1) and 2 (G2)
Isocost lines – points for which the transport costs of that material are the same
Isopadanes: points where overall cost (total input costs and transportation output costs) are
identical (lowest overall cost – ideal location)

If one material during processing losses more weight, optimal location shifts towards
direction of that material

If extra transport costs are counterbalanced by cheaper labor, the optimal location is
wherever the labor is the cheapest

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