Urrrban & Regiionalll U b an & Reg iona U ban & Reg ona Ecconomiiccs Eco nom icss E onom

Urban & Regiionall Economiics Urban & Reg ona Econom cs

AGEC 63000 Spring 2010

NOTES Intro, Industrial Location

Topics and comments The first couple of lectures are intended to provide an overview of why urban and regional dimensions of economic development are relevant, and to introduce you in detail to the theories of industrial location. The first lecture provides an overview of how (social) scientists, including economists, have looked at the spatial dimension of phenomena. Specifically, the classical and neoclassical economists perspective is discussed as well as the increased focus on spatial dimensions of economic phenomena that subsequently occurred in regional science an, most recently, in the New Economic Geography. Subsequently, the first lecture provides an outline of the course and its organization. Salient course policies are discussed as well. The second lecture deals with location theories. The advent of economic location theory goes back to Alfred Weber, and deals with the question of where firms should locate in order to maximize profits. Although the Weber type of analysis is very powerful, it is at the same time fairly restrictive in its assumptions. In later work by Leon Moses, the restriction of no substitution across inputs is relaxed. Subsequently, the work of Tord Palander and Harold Hotelling on spatial competition extends the theory to interrelated profit maximizing behavior of more than one firm. The lecture shows how price and non-price competition play a role, the number of firms, the spatial distribution of customers, and collusion behavior of firms. Finally, the lecture deals with behavioral theories stressing the significance of bounded rationality, conflicting goals and relocation costs. The following topics are discussed in the introductory lecture. Economists about space An example about the spatial distribution of economic growth Course outline, organization and course policies The Weber location-production model The Moses location-production model Palander and Hotellings theory of spatial competition Behavioral location theories Required reading materials The required reading is Chapter 1 of the textbook by Philip McCann that we will be using. In subsequent lectures readings from other sources than the McCann textbook will be added. We will also discuss the following paper: Brown, J.P., R.J.G.M. Florax and K.T. McNamara (2009) Determinants of Investment Flows in U.S. Manufacturing, Dept. of Agricultural Economics, Purdue University, Working paper 09-10. The paper is forthcoming in The Review of Regional Studies, but the working paper version is available online at http://ageconsearch.umn.edu/bitstream/54835/2/09-10.pdf. Homework # 1 The first homework deals with a location problem in a one-dimensional world, and in a two-dimensional world. In addition, one of the problems deals with the case where the behavior of competitors is relevant. The results for the first two exercises are to be handed in on paper. Exercise 3 will be done jointly in class.
1 Intro, AGEC 63000, Spring 2010