Why cities are regarded as productive engines of growth? Topic 4 P3


External economies - localization economies, urbanization economies, external scale economies and agglomeration economies



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Region-Quiz-25

External economies - localization economies, urbanization economies, external scale economies and agglomeration economies,

Topic 4_P10

  • close proximity matters,

  • firms may cluster to take advantage of external economies that result from proximity to a large number of other firms,

  • external economies:

    • localization economies that result from the firms in the same industry co-locating in the same area,

    • urbanization economies, which result from the co-location of firms in different industries

  • Agglomeration economies – the location-specific economies of scale



  1. Central place theory – factors shaping the spatial order of cities,

Topic 4_P11

  • firm’s market area is determined by the combined influence of scale economies and transportation costs to markets,

  • if scale economies are strong relative to transportation costs, all production will take place in a single plant,

  • but if transportation costs are large relative to scale economies, firms will be scattered around the region,

  • as a result all spaces will be occupied by equally spaced firms with hexagonal market areas,

  • the size of the individual hexagons will be different for different markets,

  • Central places emerge in locations where market areas for different products overlap



  1. export base theory - the region’s capability to response to exogenous world demand,

Export base theory
Topic 4_P14

  • export activities plays a main role in regional development,

  • specialisation of production in various regions,

  • regions rich in capital, export capital consuming products, while regions rich in labour force export time-consuming products,

  • potential trade exchange between such regions is more advantageous for the capital consuming ones,

  • local/regional governments in poorer regions should support not only export and free international trade, but also their infrastructural and institutional investments

  1. cumulative causation theory – “spread” effects and “backwash” effects,

Topic 4 -> Presentation -> Slide 20_21
“spread” effects as a result of:

  • Diffusion of innovations growing export into a “lagging” region

  • Growing export markets for lagging region products

“backwash” effects

  • The flow of capital and labour from the lagging region into the developed region,

  • Free trade only serves s causation to reinforce the process of cumulative further catalyzing growth in developed regions at the expense of lagging regions

  1. core and peripheries model of development – why the growth is spatially neither


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