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Lecture 3: Industry Location

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University of Toronto St. George
Political Science
Harald Bathelt

Table of contents1Traditional cost minimisation 2Agglomeration economies3Competitive location decisions4Spatial cost curves5Behavioural location analysis6Location decision as a search process7Critique of traditional location theory8Complex location factors and national competitive advantage1Traditional cost minimisation Weber 1909 viewed industrial location decisions as optimisation processesAssumptions of Webers analysis1 singleplant firm searches for an optimal location2 raw materials are used to produce 1 productTechnologicalspatial conditions do not differ between placesa Step 1 only transportation costs are variableSearch for a location that minimises transportation costsIt is to be found within the socalled location triangleLocation decision depends on the characteristics of raw materials UbiquitiesLocalised materials pure vs gross localised materials1Traditional cost minimisation 1Traditional cost minimisation bStep 2 introducing spatially variable labour costsWeber constructs lines of equal transportation costs around each raw material location isotimesSpatial aggregation leads to transportation cost mountainsA socalled critical isodapane is identified to make decisionsaStaying at the location of minimal transportation costsbRelocating to another location with lower labour costsbStep 3 introducing agglomeration costsCost advantages are assumed to result from the agglomeration of firms of an industry eg joint input sourcingThis leads to a reinvestigation of the location decision2Agglomeration economiesStudy of Hoover 1937 of the US shoeleather industryIdentification of different types of economies of concentrationaEconomies of scale internal economiesbAgglomeration economies external economiesLocalisation economiesUrbanisation economiescNew economies of scope Scott 1988
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