Lecture 2 1

KEY CONCEPTS
IN ECONOMIC GEOGRAPHY

Nguyen Cong Thanh,

Department of Natural Resource and Environmental Economics
National Economics University
Tema 5 -SE I. Key geographical concepts 2
Tema 5 -SE I. Key geographical concepts 3

• Geographical space is a set of geographic coordinate points.

• Economic space is envisioned as a combination of geographical space
and economic activities taking place on the space.
• Economic space is often uneven

a) Territory c) Flows (e.g., trade flows

Space
b) Place (e.g. cities,
specific locations)
between countries)
• Distance is an important
factor affecting trade flow
 Key geographical concepts: Location and Distance
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• A geographic location can be described using a

positioning system of coordinates with longitude and
latitude.
• Location can be used to examine position of people and
things in relation to each other. A key variable here is
distance.
• Overcoming distance requires time and money. So
relative distance, measured in transport costs and
travel time, determines a great deal about bow the
economic landscape is configured.
 Key geographical concepts: Location and Distance
Tema 5 -SE

• Relative distance also considers all possible channels for economic interaction:
– Trade of Goods and Services
– Factor mobility: Labor, Knowledge and Capital.

India

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Pakistan
Geographic distance Travel time / All interaction costs for trade,
Generalized migration and capital
Transport Costs movements

• The analysis of relative distance between producers and market places could
predict how economic activities might be arranged across geographic space.
 Tema 5 -SE Key geographical concepts: Territory 6

• Territory can be defined as “a bounded space under the control of

a group of people, usually a state”.
• Territory = A geographic area + The control over this area
→ economic activities can be affected by characteristics of both the
geographic area and the control over the area.
• Control over territory implies control both flows across the
boundaries of the territory and processes within the boundaries.
• Territorial power can be exercised by different actors (regional,
national, local states, private firms and individuals with ownership
of land).
Facebook is absent
from China
Tema 5 -SE Key geographical concepts: Place 7

• A place is not just a singular location, but a unique ensemble of human

and physical features, its connections with other places and the past

Connections with other

Internal conditions: places (international
+ environmental and trade…)
physical conditions Place
+ human landscapes (social (Its uniqueness) Connections with the
and cultural features, historical times (traditions,
economic activities). historical places…)

Understanding a place requires knowledge of both historical and

contemporary processes and how the processes have shaped a place.
→ The geographical study of the world requires many different disciplines.
 Tema 5 -SE Key geographical concepts: Place 8

• Environmental and physical conditions can be availability of

natural resources and the attractiveness of places for human
settlement.

• Human related conditions can be forms of government, religious

traditions, linguistic groups, norms relating to gender roles,
architecture, arts, social interactions between people, types of
work that people do, levels of wealth and inequalities of wealth,
the shops that exist and the things that they sell.

• Not only internal conditions, the uniqueness of a place can also

be its connections with other places and with its historical times.
 Tema 5 -SE Key geographical concepts: Scale

Dots (Zip code) ▪ Individuals (companies, families, …)

▪ Cities
▪ Sub-national units (State, region, ▪ Area
province, county…)
Polygons /
Administrative ▪ Countries
▪ Country
units ▪ (Macro-)Regions (Multi-country):
ASEAN, EU … ▪ Regions
▪ World.
 Tema 5 -SE Key geographical concepts: Scale 10

• Those scales are useful frameworks for thinking about economic processes, but
three important points should be noted:
– Scales are not hierarchical. Scales may vary in size, but this does not
necessarily mean that greater size implies greater power.
For example, a global firm like Facebook is unable to override the national
territorial power of a state, such as China. Likewise, the wealth and power of
Wall Street financiers may play a significant role in shaping the national
economic policy of the United States.
– Economic processes work at multiple scales simultaneously.
Geographical analysis of economic activities should keep multiple scales in
mind at the same time.
For example, the decision of Samsung to invest in smartphone production in
Thai Nguyen, Vietnam could be related to conditions (tax benefits, labor
costs…) of Thai Nguyen Province, Vietnam, nearby countries (China,
Thailand…) and the location of Vietnam in the world economy.
– Scales do not naturally occur, but are humanly created. First, a scale
such as “the national”; “the urban” or EU refers to entities that we have
collectively created. Second, a scale is being constructed and reconstructed
with ongoing changes in our economies and societies over time.
For example, EU, created by European countries, is changing with Brexit.
Tema 5 -SE Key Concepts in Economic Geography 11

• Market potential and connectivity-accessibility

– Connectivity-accessibility can be defined as the ease with which people,
materials and information can be moved from one location to another (e.g.
within and between regions).
– In contemporary economies, these movements are usually supported by
dedicated transport infrastructure (e.g. rail, road, air, water) and
telecommunication networks (e.g. telephone, telegraph, internet).
– Therefore, connectivity-accessibility could also be seen as a measure
of the ability of these infrastructures and networks to reduce the relative
distance within and between regions.
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• Market potential and connectivity-

accessibility
– Connectivity usually relates to the features of a
given transport or communications network.
– Connectivity can be measured in two basic ways:
• The first one is to measure the level of connectivity
of an entire network (i.e. the degree to which the
network as a whole is internally connected).
The beta index, one of the most frequently used to
measure connectivity, is calculated as the ratio of
links (connections) to nodes (e.g. urban centres).
The higher the number of links to nodes, the higher
the degree of connectivity of a given network.
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• Market potential and connectivity-

accessibility
– Connectivity can be measured in two basic ways:
• The second option is to measure the level of
connectivity of individual places (nodes) within a
network. In other words, node connectivity measures
the degree to which individual nodes are connected
with other nodes within the network.
The simplest measure of node connectivity is the
number of direct links that a particular node has with
other nodes. The more direct links a particular node
has, the higher its degree of connectivity.
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• Market potential and connectivity-accessibility

– Accessibility is based on the explicit recognition of the importance of both the
geographical distances between nodes (e.g. urban centres) and the characteristics
of the nodes (or attributes of destinations).
– The attributes of destinations represent the level of attractiveness of nodes. The
level of attractiveness of destinations is frequently associated with the size of their
markets, which can be expressed as an economic mass or volume of economic
activity either in terms of population size, income, spending power, gross domestic
product (GDP)…
– The concept of accessibility explicitly recognises the fact that population (and
therefore market) is not evenly spread over space.
– It is expected that a firm will be more successful if it locates in places (regions) with
high levels of accessibility. In turn, regions with high levels of accessibility are
expected to be more economically viable.
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• Market potential and connectivity-accessibility

– Market potential or economic potential represents the most frequent way of
measuring accessibility.
– The economic potential of a region is a positive function of the size of markets
(economic mass) that can be accessed from the region, and a negative function of
relative distance that needs to be overcome when reaching those markets.
– In the simplest measure of regional accessibility, the potential of any region can be
calculated as:
𝑛
𝑀𝑗
𝑃𝑖 = ෍
𝐷𝑖𝑗
𝑗=1

where Pi is the potential of region i, Mj is a measure of economic mass (e.g.

population) in region j and Dij is a measure of impedance (distance) from region i
to region j, and n is the total number of regions in the system.
– Regions located close to the big markets (and therefore presumably having the
cheap access to them) would be seen as having the higher economic potential.
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• Market potential and connectivity-

accessibility
– If assuming all the urban centres in a
space were of equal size (e.g. towns
with populations of 10,000 each)
– The picture of accessibility
measured through the market
potential model (with population as
a measure of economic mass) would
be:
• The urban centres located in the
geographical centre of the space would
display the highest level of accessibility.
• The urban centres located at the
geographical periphery of the space
would be considered as the least
accessible
Tema 5 -SE Key Concepts in Economic Geography 17

• Market potential and connectivity-

accessibility
– If the populations of these urban centres
start to vary, the picture of accessibility can
change considerably, due to the changing
market potential.
– If assuming urban centre G were to
become a city with a population of 500,000,
city G (formerly one of the least accessible
places) would become the most accessible
place on the island (all this without
changing the levels of connectivity).
– Thanks to their proximity to city G, urban
centres F and H, would overnight become
the second-best ‘accessible’ places on the
island, perhaps attracting some population
growth, thus further strengthening their own
market potential.
Tema 5 -SE Key Concepts in Economic Geography 18

• Spatial displacement of capital (Spatial fix for crisis of

overaccumulation)
– The entire capitalist system is based on the incentive to profit from economic
transactions. To maintain profit, it is necessary for capitalism as a system to grow
continually.

– Sooner or later, a crisis of overaccumulation will surface. Such a crisis is caused by

over-production (high levels of stock) and/or under-consumption (declining demand)
→ profits decline.
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• Spatial displacement of capital (Spatial fix for the crisis of

overaccumulation)
– There are ways to avoid crises and restore the conditions for profitability:
• Devaluation: This process involves the destruction of value in the system.
Recreating value gets the system moving, but with significant costs.
• Macro-economic management: This requires government interventions (heavy
government spending, regulations on labour conditions…). These interventions help
in ensuring that demand in the economy is maintained.
• Temporal displacement of capital: This involves switching resources to meet future
needs rather than current ones - for example, by investing in new public
infrastructure, or by using over-accumulated capital as loans and thereby intensifying
future production.
• Spatial displacement of capital: This involves opening up new spaces for capitalist
production, new markets, or new sources of raw materials. The spatial horizons of
the system are expanded. This might mean the development of entirely new
production sites in newly industrializing parts of the world or the re-creation or
rejuvenation of old spaces.
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• See-saw of uneven development

– A see-saw of uneven development is used to describe the flow of capital from one
region to another in search of profit.
– The see-saw of uneven development implies that some places are sites of rapid
investment and growth while others decline. Given the limited resources,
development in one area (e.g., industrialization in China) or region (e.g., Silicon
Valley) is impossible without simultaneous underdevelopment in another area (e.g.,
decline in older manufacturing regions).
– But over time, the see-saw can swing back
again so that older spaces are recreated as
sites of new investment. Destruction and
devaluation of places left behind may create
pre-conditions for future renewed growth.
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• Spatial division of labour

– Divisions of labor essentially refer to the separation of roles in the process of
production and in society at large.
– Technical division of labor is the differentiation of specific tasks in a production
process, so that individual worker contribute just one small part to the larger goal.
Example: Division of labour in a pin-making factory described by Adam Smith in his
book “An Inquiry into the Nature and Causes of the Wealth of Nations” published in
1776.
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• Spatial division of labour

– Social division of labour is a more general concept which goes beyond the
boundaries of a firm to describe the roles performed by various people or groups of
people within a society.
– Social divisions of labour thus may refer to the division of labour between various
sectors (e.g. agriculture, fisheries, pin-making, car-making industry, banking
sector, education sector, health service...) or to workers in different jobs or
professions (e.g. farmer, fisherman, pin-maker, car factory worker, banker,
teacher, nurse...).
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• Spatial division of labour

– Spatial divisions of labor arise where particular types of economic activity or
production tasks are concentrated in specific geographical areas.
– For example, head offices might be concentrated in capital cities, manufacturing in
other urban centres, and mining in the resource-rich periphery of a country.
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• Spatial division of labour

– International division of labor is an example of a spatial division of labor at a larger
spatial scale, whereby countries specialize in particular kinds of activity.

Boeing 787
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• Spatial division of labour