urban and regional development khin chaw myint associate professor department of applied economics
TRANSCRIPT
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Urban and Regional Development
Khin Chaw Myint
Associate Professor
Department of Applied Economics
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Terms and Concepts• Urban Economics - A study of location choices of firms and
households - examines the where of economic activities - a household chooses where to work/ live - a firm chooses where to locate its factory/
office/ retail outlet - Urban economics explores the spatial aspects
of urban problems and public policy
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• Urban problems – poverty, urban decay, crime, congestion, pollution are intertwined with location decisions of households and firms:
• Location decisions contribute to urban problems and urban problems influence location decisions
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• Three reasons for the urban in urban economics
• 1. most location decisions involve an urban choice ( majority of people living in urban areas)
• 2.urban economics is concerned with location choices within cities
• 3. most of the pressing problems caused by location choices occur in urban areas.
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• Urban area
- an area with a relatively high population density.
- Municipality –the area over which a municipal corporation provides local government services such as sewage, crime protection, water supply etc.
- Urbanized area- includes at least one large city and the surrounding area with pop. density exceeding 1000 people per acre. Total pop. must be at least 50,000.
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The role of cities• Why do cities exist?
- for individuals are not self-sufficient.
- cities are where the jobs are/ opportunities
- higher living standards/ more pollution, crime, noise, congestion.
- three main reasons for concentration of jobs in cities
-comparative advantage
-internal scale economies
-agglomerative economies
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-Comparative advantage/ trade between regions market cities
-Internal scale economies/more efficient production for firms industrial cities
-Agglomerative economies in production/marketing firms cluster in cities large industrial/market-based cities
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A model of a rural region
• A region without cities
• Assumptions that prevent the development of cities/When these assumptions are dropped, cities will develop
• Assumptions
-Only two commodities are produced(wheat and wool cloth) and consumed
(1) Inputs, labor and land only.
(2) Equal productivity
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Cont’d (3) No scale economies/constant returns to scale
(4) Travel time – travel within the region is by foot only with a speed of four round-trip miles per hour.
-These assumptions-strong enough to prevent trade.
-No advantages from trade or centralized production/every household, self-sufficient
- population distribution will be uniform.
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Market Cities
• If the assumption of equal productivity is relaxed, a region or part of a region may be able to produce than the other part of that region
• Thus, there will be a comparative advantage to produce the good that it is more efficient/based on the opportunity cost concept.
• Comparative advantage in one good may lead to a surplus and trading activity will emerge.
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• With specialization, both parts of the region can gain from trade.
• If trading takes place, people engaged in and linked to this activity will settle in such places.
• Mostly trading takes place in places where goods can be delivered and transported easily, examples are ports, road junctions/crossroads..
• If more people become settled in this area, the population density will increase/a market city appears
• But transport costs must be reasonable so that trade can be beneficial.
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• But three conditions must be satisfied:
• The agriculture sector/rural areas feeds the urban population
• Transport costs must be low for trading activity to exist
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Industrial cities
• If the assumption of constant returns to scale is relaxed, industrial or factory cities may emerge
• For this, the factory price(one yard) for the assumed cloth production must be able to underprice home made cloth
• Suppose the time or price for a yard of cloth is 1 hour
• If the factory can produce with less than one hour, people will no longer produce at home
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• They will turn to the factory and as factory production survives, people will settle near this factory and pop. density will rise/a factory city or an industrial city appears
• But certain conditions must be satisfied:
• The agri. surplus feeds the factory workers
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Large Industrial cities
• Agglomerative economies in production:
• Localization and urbanization economies
• Localization economies
• -- an increase in the total output of a particular industry
• Three principal reasons
• -scale economies in inputs
• -labor market efficiency
• -communication economies
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• Scale economies– same input supplier/ reduce costs
• Labor market efficiency– low search costs/low moving costs because of job information received through informal channels/ advertisements
• Communication economies– diffusion of technology, ideas, product designs etc.
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• Urbanization economies—same reasons as localization economies but the total output increase is due to the increase in total output of the entire urban area not just of a particular industry
• In urban areas employment condition is stable as businesses can reduce or increase their labor force easily
• Urban areas have people of diverse backgrounds and innovation is easy to take place
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Large market based cities
• Agglomerative economies in marketing:
• Shopping externality occurs as sales of one store increases as it becomes located to another or other stores
• Imperfect substitute goods --- comparison shopping e.g. car show rooms..
• Complementary goods--- one stop shopping e.g. pants/coats and shoes/socks
• Save transport costs and more convenient
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Location of cities• Commercial firms
• Trading related firms—cities located depending on the trading activity
• River ports, junctions, crossroads etc.
• Different size of cities exist depending on the location of economic activities concerned
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Transfer- oriented firms• Raw materials/ market oriented firms
• Firms locating in the vicinity of input source/market
• Depends on the product, whether weight gaining or volume gaining after production and whether weight losing or volume losing
• If the good produced is weight losing/volume losing the location should be near the input source as to save transport costs
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• If the good produced is weight gaining or volume gaining, the firm should locate near the market
• Transport costs can be less if location is near the market