URBAN AND REGIONAL ECONOMY

GeEs 516

CHAPTER ONE
INTRODUCTION

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 URBANIZATION
 It is the process of population concentration in
non agricultural regions/activities
• It refers to the proportion of people in living in
cities.
• It also refers to the process in which rural
populations move to urban areas.
• Urbanization refers to all of the cities in a country,
considered as an urban system.
• The urban system is the network of individual
cities within a region or country.
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 Urbanization in the World

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 By the year 2025, it is projected -80%
In 1940, 71% of city dwellers lay
north of 40 degree, which reduced
Year 1m 5m 10m
1850 2 0 0
1900 11 0 0
1950 70 0 0
1985 273 29 10

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 Urban and Rural Population,
Less Developed Countries
1950 to 2025

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 Projected Urban and Rural
Population MDCs and LDCs,
1950-2030

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• Of the 15 largest cities, 4 are in
MDCs (LA, NY, Tokyo, and Osaka)
and 11 are in LDCs
• By 2015, the ranking of these largest
cities will change in favor of the LDCs
(e.g., NY falls from no. 3 to 11)

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 Urbanization in MDCs and LDCs
LDCs
MDCs
Slow during pre-
industrial growth
Rapid in industrial
growth
Slows again once most
previously rural
populations are in cities
Europe, North America,
Australia and Japan, the
population is 75% to
80% urban.
Canada is 80%
urbanized.
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Rapid urbanization
without proportional
industrialization
(population growth,
land tenure)
By 2020 majority of
LDC population will
live in urban areas of
1 million+
By 2020 most
megacities of 10
million+ will be in
LDCs
8
 Cities with 10 million or more people
2015

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 Sources of Urbanization
• The urban system of a country grows mainly by:

1. Natural population increase (births – deaths)

2. Migration from rural areas (especially in
countries with large rural populations)
3. Immigration from other countries (especially in
Europe and North America)
4. Reclassification of urban boundaries to encompass
formerly rural areas

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 Urban and regional economics
Urban Economics & Geography: questions
• Why/how do some cities grow faster than others?…
• What determines locations of different types of activities?…
• What determines location value ( land value)?
• How does location value change over time in different parts of
a city?
• Why cities form, grow, & decline
• What are the centralizing & decentralizing forces that explain
the number and sizes of cities
• What is a "system" of cities, and the essential characteristics
of the Ethiopian system of cities
• What is meant by the economic base of a city
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 Urban economics
• Urban economics is the economic study of urban
areas.
• It uses the economic tools to analysize urban
issues such as city growth, housing, land,
employment, transportation, health, education,
crime, urban environment, local government
finance, and social issues.

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• Urban economics is the study of the role that
economics plays on the location and
concentration of economic activity.
• Urban areas are unique in that they are
characterized by economic benefits as well as
problems associated with population density or
others.
• It helps to know the role that space has on
economic decisions, including where you may
locate a potential business or, select to purchase
a house.

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• Urban economics focuses on the
spatial relationships to understand
the economic motivations underlying
the formation, functioning, and
development of cities.

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Arthur O’Sullivan believes urban economics is
divided into six related themes:
1. market forces in the development of cities,
2. land use within cities,
3. urban problems and public policy,
4. urban transportation,
5. housing and public policy, and
6. local government expenditures and taxes
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 WHAT IS REGIONAL ECONOMICS?
• Economic systems are dynamic entities, and
the nature and consequences of changes that
take place in these systems are of
considerable importance.
• Such change affects the well-being of
individuals and ultimately the social and
political fabric of community and nation.

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• Here we take urban area as a system and study
economic situations as a whole and differentiate
differences among city regions
• Attempt to separate into recognizable
component parts the diversity and
complexity of city’s regions
• Addis Ababa----10 sub-cities
• Tokyo---five city regions

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 Importance of cities
• Urbanization is an inevitable force of
development. Cities are more productive than
rural areas. They provide efficient
infrastructure, services, communications and
skilled labor forces.
• They can achieve the economies of scale,
agglomeration and urbanization. Cities are the
driving forces of national economic
development.

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• Cities have demonstrated productivity, efficiency.
• Cities play an important role in economic
development.
• They attract talents and skilled labor that allow
specialization in knowledge, skills.
• Economic growth and urbanization are often
positively linked.

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 Distribution of urban centers
• Unevenness
• Low level in LDCs---high rate
• High level in MDCs----low rate
• Varies even among regions, low in Africa
but relatively high in S. America
• Difference in history of urban
development
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 Urban characteristics

According to Louis Wirth, Urban Settings Have 3

Characteristics:
1. Large size—physical and population size
2. High Density: each person has a role essential for the
urban system to function smoothly, people
compete for survival in limited space.
3. Social Heterogeneity:

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 Urbanization and Development
• Economic growth and urbanization are often
positively linked. Cities are the driving force for
economic development.
• Economic growth also stimulates urbanization.
Such positive relationship is clear in many
countries.
• However, urbanization can also occur in the
absence of economic growth. For example, in
some Sub-Saharan African countries, urbanization
has occurred to a large extent independent of
economic development
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 Urbanization and economic dev’t

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 CHAPTER TWO
URBAN SPATIAL STRUCTURE AND
FUNCTIONS

25
Classification of towns
Towns and cities can be classified into
different categories based on:
1. Age and Land use pattern
2. Population Size
3. Function

26
i. Classification of towns by age and land use
pattern
•Based on their stage of growth (age) and
pattern of land use, G. Taylor classified towns
into four
1. Infantile Stage, which is characterized by
• Absence of land use discrimination (no clear
zoning)
• Buildings are badly distributed-no pattern
• Small towns mostly grouped under this stage
27
2. Juvenile/young Stage, this stage manifests;
• Land use differentiation starts
• • Small shops and other business concentrated surrounding the
center
• • Factories began to appear
3. Mature (Adolescent) stage: is characterized by
• • Clear separation of commercial, industrial and residential
areas
• • Sub-town development starts
• • Vertical expansion of town is a common feature
• • Differentiation of house type
4. Salinity Stage: it is a stage in which
• • Cease of the dynamic growth character
• • Decaying of some areas
• • Decline in economic development
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ii. Classification of towns by population size
• 1. Small town: a town population below 50,000
• 2. Major town: an area with a population
between 50,000-99,999
• 3. City: an area with a population between
100,000-999,999
• 4. Metropolis: a city with a population of 1
million and above
• 5. Megalopolis: an urban center with a total
population of 10 million and above

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iii. Classification of towns by function: based on the
main function that involves the lion share of the
population, towns can be classified as:
•1. Administrative Towns: - National capitals, which
have headquarters of the administrative offices of
Central Government, are called administrative towns,
such as new Delhi, Canberra, Addis Ababa, Moscow,
and Washington.
•2. Defence Towns: - Centres of military activities are
known as defense towns. The types:
•Fort town/Garrison towns and Naval bases. Jodhpur
Mhow is a garrison town; and Kochi is a naval base.

30
• 3. Cultural Towns: - towns famous for religious,
educational or recreational functions are called cultural
towns. Places of pilgrimage, such as Jerusalem, Mecca,
Jagannath Puri and Varanasi etc. are considered as
religious towns.
• 4. Industrial Towns: - Mining and manufacturing regions.
D Towns which have developed due to setting up of
industries such as Liverpool are called industrial towns.
• 5. Trading and Commercial Towns: - Many old towns were
famous as trade centres such as Lahore in Pakistan,
Baghdad in Iraq and Agra in India.
• Some towns have developed as transport towns such as
Rotterdam in the Netherlands, Aden in Yemen and
Mumbai in India are port towns.
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THE SIZE AND SPACING OF CITIES
• Nothing is evenly distributed all over the world i.e., there is
a spatial variation on the size and spacing of cities’, in this
regard, scholars made several rules and principles. The
notable once include urban hierarchy, rank size rule and the
law of primacy.
A) The Urban Hierarchy- is the vertical classification of
towns and cities in a given country or region depending on
a number of factors of which some are presented here:
• the size of the settlement in terms of its population
• the range and number of services a settlement has
• the sphere of influence--the size of the area served by the
settlement and
• Extent of built up area or central place status.
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Hierarchies of Settlement
…

33
 Urban Hierarchy-
from smallest to largest
Hamlet-cluster of farmer’s houses with a few basic
services.
Village-smallest urban settlement. Several dozen
services more specialized than a hamlet.
Town-has more specialized function. May have a bank,
post office, hospital, schools. Towns have a hinterland-
smaller villages or hamlets economically dependent on
it.
City-large population, functional specialization. Well
defined central business district.
Megalopolis-multiple cities that have grown together.
• A larger urban settlement is the greater its
sphere of influence is likely to be, as it has a
wider range of services and functions to attract
people to go there.
• A small town may only have a small retail
services like daily newspaper and food such as
bread and milk. People will only travel the
shortest distance they need to buy these
products.
• A larger town would have a wider sphere of
influence because it would have shops and
services that are more specialists, and so people
would be willing to travel further to use them.
An example might be a furniture shop 35
 Urban Components
• CBD- Central Business district
• Central City- urban area that is not suburban
• Ghetto- inner city that has become
dilapidated
• Node- centers of activity
• Suburb- residential communities
• Exurb- ring of prosperous communities
beyond the suburbs
 Determinants of city size
• Physical and population size
• Physical size depends on
• Nature and availability of land/topography---
example Desie vs Combilcha
• City master plan—vertical vs horizontal
• Economic development: the structure of the
national economy; level of industralization
and opportunities

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 Theories of Settlement Systems
Zipf’s Rank-Size Rule
•Relation b/n rank size of a centre and its population
represented as:
P1
Pr 
R
•Pr = population of centre r;
•P1 = population of largest centre;
•R = rank size of centre r
Largest City ' s Population
CityPopulation =
Rank of City
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 Rank Size Rule
• Rank size ordering describes patterns of urban sizes
in complex economies where urbanization is well
established.

• Tells us that the nth largest city will be 1/n the size of
the largest city.
– Example the 2nd largest city will be ½ the size of the first
largest city.
– In some countries the primate city so dominates that no
other cities fit the rank size order.
 Theoretical picture
Exhibit 3-1a:
The or e t ical Rank /Siz e Rule

1
3
5
7
R an k

9
11
13
15
17

19
21
23
25
0.00 1.00

Population

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 Actual sizes & ranks of U.S. cities
Ex hibit 3-1b:
The Ra nk/Size Rule in US Citie s

N YC

DC-Balt

BOS

HOU

SEA

PHX

PGH

POR

MIL

IN D

0 5,000,000 10,000,000 15,000,000 20,000,000

Population

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 Actual sizes & ranks of European
cities Exhibit 3-6: Population of Major European Cities

London 9115000

Paris 8720000

Milan 4749000

Madrid 4513000

Barcelona 4227000

Manchester 4030000

Athens 3507000

Rome 3033000

Berlin 3021000

Naples 2978000

Lisbon 2426000

Source: US Census estimates, 1992,

based on common definition of contiguous built-up area of density 5000 inhab/sqmi

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 Shortcoming of Zipf’s law
• Standard size as strong side
• Does not consider physical size
• Landscape---topography
• Habitability of the area
• Resource and other opportunities of the
region not considered
• Government policy

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 The law of the primate city
• primate city a condition where a single city
dominates other cities in the intra-national urban
system in terms of population size.
• Geographer Mark Jefferson (1939) He defined a
primate city as being "at least twice as large as the
next largest city.
• Its degree of primacy will be measured by the
proportion of the urban population living in that
city.
• Capital cities are very often the primate cities of
countries
44
• In small countries or areas, it is easy for virtually
all the urban population to be concentrated in a
single city. In those cases, the primate city may
account for over 90 per cent of the urban
population.
• Example: Djibouti
• Even in larger countries, primate cities
sometimes account for more than half of the
total urban population. Mexico city
• The primate city in countries could be changed,
b/c of fast population growth/ change in
functions
45
 Costs and benefits of urban
primacy
• Generally, urban Primacy has the following
negative consequences:
A. For the Primate City
• High costs of living
• Overpopulation, congestion, pollution.
• High land value/costs
• Growth of slums
• Lack of city planning
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B. For the non-primate city
•A primate city absorbs a disproportionate
share of the national budget and public
resources: leading to deteriorating
conditions in other urban centers.
•This leads to worsening in the quality of
life in non-primate cities including poor
health, high child mortality and low school
enrollment.
47
Possible Solutions
• Stop subsidizing
• Reduce Government spending on infrastructure
• Promote development potentials of other places
• Relocate capital and political centers (Change---
Lagos to Abuja; )
• Do we have such kind of experience at the
national and regional levels?
• Develop effective city planning policy?
• Some more
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 INTERNAL STRUCTURE OF TOWNS

• Urban structure (layout) –urban morphology, is

simply the arrangement of different land use patterns
in urban areas focusing on how and where the various
residential and non residential components of the city
are positioned/located
• Model – A simplified/ abstract /general representation
that shows reality/urban land use pattern
• Different models are used to simplify complex, real
world situations, and make them easier to explain
and understand.
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• Urban Geographers analyze the internal land
spaces of cities and the various uses that it
serves.
• Cities are often arranged/segregated in similar
ways, allowing geographers to develop models
of urban land use.
• The models are influenced by:
– Accessibility—connectivity/ease to use
– High/cost of accessible space
– Transportation
– Societal and cultural needs.
• Accessibility
– Functions of cities be fulfilled in spaces accessible
to its inhabitants. Ex. High density housing within
walking distance of workers during the Industrial
Revolution.
• High cost of accessible space
– The cost of land ↑ as available land↓
– Mass transportation allowed the amount of
useable space to grow.
– Population density pushes the cost of land and
other commodities higher.
• Transportation
– Lines of transportation determine the growth
of a city.
– Land with highest accessibility is the most
desirable and generally the most expensive.
• Societal and cultural needs.
– Economic competition determines land use.
– Some highly desirable land is usually set
aside for parks, schools, libraries. Look at
Central Park in NYC—world class tourist
center
– Public square????
 The Central Park
• Located in NYC
• Water, vegetation, glaciers, sculptures, etc
• Many American films produced there
• It is 4 km long between Central Park South
and Central Park North, and is 0.8 km
• Central Park founded in 1857
• $35 billion

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54
Inside the forest

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 Types of land use
There are different types of land use such
as
1.Commercial land use
2.Residential land use
3.Industrial land use
4.Institutional land use—public offices, health,
education, etc
5.Transportation land use
6.Recreational land use
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 Characteristics of CBD
• heart of city • high order
• focus of major
transport routes retailing business
• highest accessibility • airline companies
• limited space
• High competition of • traffic congestion
land use • vertical zonation
• highest rent
• tall buildings • Central location
• modern buildings

57
57
 Theories/models of urban structure/
internal—land use

• There are a number of different functional zones (urban land

use pattern) within urban areas.
• The term functional zones refers to different activities,
which tend to take place in different parts of a city with
in a city.
• Sociologists, economists, and geographers have developed
several models and /or, explaining where different types of
people and business activities tend to exist within the urban
setting.

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 Functional segregation
• Similar activities tend to aggregate together
because of Similar locational requirements and
External economies of scale
• Different types activities are separated from
each other because :
--Different locational requirements
--Different rent-paying ability
--Conflicts/competition amongst them

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Generally
• Land rent decreases with increasing
distance from the city centre—what ever
its function is
• competition for land and accessibility
push up the land value/rent
• different land use has different rent
curve because they have different
demand for accessibility and space

60
Three different models developed to explain
land use within cities.
• The 3 models were all developed in Chicago,
with flat land and only Lake Michigan to
disrupt the landscape.
• The three models:
– Concentric Zone model
– Sector model
– Multiple Nuclei Model
 Concentric Zone Model
• Created in 1923
• Sociologist EW
Burgess
• It views cities
growing outward
from a central area
in a series of
concentric rings.
Concentric Zones
 Concentric Zones
• Zone 1-CBD, nonresident activities, property costs↑.
• Zone 2-Zone in transition, light industry, housing for
poor, services in transition between CBD and
residential areas in outer zones. Housing formerly
occupied by the wealthy, who have moved farther
out. Industry in Zone 2 are too large to fit into Zone
1, owners seeking cheaper land.
• Zone 3-working class homes, modest older homes
on smaller lots. Housing is less expensive than outer
rings.
 Concentric Zones
• Zone 4-homes are larger and more expensive.
Middle class single family homes or high rent
apartments. These persons choose location
and afford high cost of transportation to the
CBD.
• Zone 5-commuter zone, farthest from CBD.
Beyond continuous built up area. People live in
small villages where they spend leisure and
sleep hours and commute to the CBD.
 Sector Model
• Developed by Hoyet, in 1939
• Cities develop in a series of sectors.
• Sectors develop by environmental factors or
by chance.
• As cities grow, activities expand outward like a
wedge.
• Once an area is established for industry, other
industry will cluster around it.
• Wealthy areas attract wealthy. Middle class
live next to wealthy.
Sector Model
 Multiple Nuclei Model
 Harris and Ullman, 1945
 Explains that large cities develop by spreading from
several nodes of growth, not just one.
 Individual nodes have special functions
 This model explains that incompatible land use activities
do not cluster in the same location.
 Nodes influence the type of development that occurs
around them.
 This model explains then clusters come into contact,
incompatible land uses will develop along juncture lines.
Multiple Nuclei Model
 Summary
• All 3 models help explain not only land use, but
the different social characteristics of people
living in areas of a city.
• These models may be used along with census
information.
• Census tracts-division of urban land areas in the
USA.
– Approximately 5,000 people
– Correspond to neighborhood boundaries.
 City Transect
Increase in vegetation

This city transect shows a cross section through a city. The CBD is located in
the centre of the diagram and the other areas are clearly marked. Changes in
the quality of life--- Examples: traffic, costs, vegetation, etc.
City Transect
Examples of labels
Increase in vegetation Increase in building height

Decrease in traffic congestion Increase in crime

Increase in housing cost Decrease in space

Decrease in land costs Increase in competition for land

Decrease in services Decrease in car ownership

Urban Model
LEDC Model
Cities in LEDCs have a very different
land use pattern to those in MEDCs.
The CBD is dominated by modern
administrative and commercial activities.
Richer people live in modern high-rise
apartments around the CBD. Recently
arrived migrants from rural areas live in
ruined land and on the outskirts.
Housing quality decreases with distance
from the CBD, unlike in MEDCs, where
quality increases with distance from the
CBD.
 spacing of cities
Central Place Theory
• So far we have seen about internal structure or land use patterns of
cities.
• CPT is a spatial theory in urban geography that attempts to explain the
reasons behind the distribution patterns, size, number as well as
spacing of cities and towns around the world.
• The central place hierarchy provides a description
of the relationship between a central place--higher
order place--and its tributary areas--lower order
places.

74
• CPT developed by the German geographer
Walter Chris Taller in 1933 after he began to
recognize the economic relationships between
cities and their hinterlands (areas farther away).
• He tested his theory in Southern Germany and
came to the conclusion that people gather together
in cities to share goods and ideas and that they
exist for purely economic reasons.
• In keeping with his economic focus, he came to
the conclusion that the central place exists
primarily to provide goods and services to its
surrounding population.
• Thus, every settlement is a central place. 75
Walter Chritaller (1893-1969)

76
• Central-place theory attempts to illustrate
how settlements locate in relation to one
another, the amount of market area a
central place can control, and why some
central places function as hamlets, villages,
towns, or cities.

77
 The theory then relied on two concepts: threshold and Cont’d….
range.
Threshold: is the minimum number of people (lower limit population)
needed for a central place business or activity to remain active and
prosperous, and influenced by frequency of use of services.
•It is the minimum number of people required to support the service

Range of goods (Market range): is the maximum distance consumers

are prepared (willing) to travel to acquire goods - at some point the cost
or inconvenience will outweigh the need for the good.
 Thus it is the maximum distance people are willing to travel to use
a service
 each good has its particular range and threshold

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The above two concepts then brings in the idea of low-order
Cont’d….
and high-order goods.
1. Low-order- goods are things that are replenished
frequently such as groceries, bakeries, newspaper etc.
• Because these items are purchased regularly, small
businesses in small towns can survive because people will
buy frequently at the closer locations instead of going into
the city.
• These are goods and services are those with a narrower
range and lower threshold, located in smaller urban
centers
• People are not willing to travel long distance to buy
vegetables/soft drinks, bread or newspaper. Do you?
79
2. High-order goods- are specialized items such as
automobiles, furniture, fine jewelry, and household
appliances that are bought less often.
• Because they require a large threshold and people do
not purchase them regularly, many businesses selling
these items cannot survive in areas where the
population is small.
• Goods and services are those with a wider range and
higher threshold, located in larger urban centers
• Therefore, they often locate in large cities that can
serve a large population in the surrounding hinterland
• Where do we find car selling businesses in Ethiopia?

80
Which one is highest/lowest order
settlement?
• Hamlet: fewest goods and services available
• Village: includes the region of the hamlet and
some additional goods and services
• Town: includes the region of the village and
hamlet and provides some additional goods and
services
• City: includes the region of the village, hamlet
and town and provides additional goods and
services
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 Cont’d….
 Centrality- is the degree to which a town serves its surrounding
areas (hinterlands), and can only be measured in terms of the
goods and services offered.
 Central place functions: activities, mainly within the tertiary
sector, that market goods and services from central places offered
for the benefit of local customers and clients drawn from a wider
market area.
• Typical functions include retailing, wholesaling, professional and
entertainment
• Hinterland refers to the area surrounding a service from which
consumers are drawn
• The higher the centrality of a central place is, the larger the
hinterland.

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 Cont’d….
 Sphere of influence: an area over which an urban centre
distributes services (e.g. the delivery areas of shops) and
recruits labour (e.g. the commuter belt) as well as
providing that area with a sense of focus through the
exercise of various forms of leadership (e.g. publishing a
weekly newspaper, possessing a local radio station,
functioning as a seat of local government).
• The term is broadly synonymous with a whole range of
terms that occur in studies related to central place theory,
e.g. hinterland, market area, tributary area, and urban
field.
• One important quality of most spheres of influence is that
they display a distance decay characteristics.
83
 Distinct Rules
The result of these consumer preferences is that a system of centers
of various sizes will emerge. Each center will supply particular types
of goods forming levels of hierarchy. In the functional hierarchies,
generalizations can be made regarding the spacing, size and
function of settlements.
1. The larger the settlements are in size, the fewer in number they will
be, i.e. there are many small villages, but few large cities.
2. The larger the settlements grow in size, the greater the distance
between them, i.e. villages are usually found close together, while
cities are spaced much further apart.
3. As a settlement increases in size, the range and number of its
functions will increase .
4. As a settlement increases in size, the number of higher-order
services will also increase, i.e. a greater degree of specialization
84
occurs in the services.
Assumption
• Christaller’s theory assumes that central places
are distributed over a uniform plane of constant
population density and purchasing power.
• Movement across the plane is uniformly easy in
any direction,
• transportation costs vary linearly/ proportional
to distance, and
• consumers act rationally to minimize
transportation costs by visiting the nearest
location offering the desired good or service.
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86
2
3

4
88
 Hierarchy of central places and services

few
many

services

places
2
many 3 few
Many low order places;
few high order places 4
 Cont’d….

• Each center will supply particular types of goods forming levels of hierarchy.
• In the functional hierarchies, four generalizations can be made regarding the
spacing, size and function of settlements.
1. The larger the settlements are in size, the fewer in number they will
be, i.e. there are many small villages, but few large cities.
2. The larger the settlements grow in size, the greater the distance
between them, i.e. villages are usually found close together, while
cities are spaced much further apart.
3. As a settlement increases in size, the range and number of its
functions will increase.
4. As a settlement increases in size, the number of higher-order services
will also increase, i.e. a greater degree of specialization occurs in the
services.
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 The three principles in the arrangement
of the central places
Different patterns result from different values of k (low order center+)
•market optimizing, k=3 (minimizes total number of settlements
serving a region)
•Traffic/transportation optimizing, k=4 (emerges by minimizing the
road lengths joining all adjacent centers)
•administration optimizing, k=7 (assumes lower-order places must be
contained in the administrative districts of higher order places; can not
be situated on the breakpoint)
•The number of settlements CP serving----3; 4; 7

1. The marketing principle

•There can be many orders of settlement.
(a) First order service center providing first order services.
(b) Second order service center providing second order services.
(c) Third order service center providing third order services.

91
92
 Cont’d….

• The different orders of settlements arrange themselves in a

hierarchy. Generally speaking lower is the order; larger is the
number of settlements and higher the order, greater is the area
served.
• If the arrangement of the settlements is according to the
principle k=3, the theoretical number of settlements will
progressively divide the previous order by 3 as shown in the
following table:

Order of central places according to K_3 principle

93
 Cont’d….
Actual total Acummulative number
• 7th order 1 1
• 6th order 3 4
• 5th order 9 13
• 4th order 27 40
• 3rd order 51 91
• 2nd order 153 244
• 1st order 459 703
 One high order central place is serving three (including itself)
of the next lower order central places. The relationship of the
market area between a lower order center and the centers of
the higher level can also be indicated by the value 3.

94
 2. The transportation principle
• Christaller pointed out that the marketing principle is an outward
arrangement in terms of connecting different levels of the
hierarchy.
• As an alternate arrangement, Christaller suggested that central
places could be organized according to what he called the
transport principle.
• The traffic principles states that the distribution of central places
is most favorable when as many important places as possible lie
on one traffic route between two important towns, the route
being established as straightly and as cheap as possible.
• The more unimportant places may be left aside.
• According to the transport principle, the central places would
thus be lined up on straight traffic routes which fan out from the
central point.

95
 Cont’d….
• When Central places are arranged according to the traffic principle,
the lower order centers are located at the midpoint of each side of
the hexagon rather than at the corner. Thus the transport principle
produces a hierarchy organized in a k=4 arrangement in which
central places are nested according to the rule of four.

• Figure 3.8 Transport Principle

96
Lower-order centers will develop along the transportation lines
linking the higher-order centers.
K centers will locate in the middle of the transportation link
between any two B centers;

97
impact of water, road, railroad
on the location of towns

market principle towns

transportation-based towns
actual towns
potential towns 98
 Cont’d….
• The following table shows how the k=4 principles can be interpreted:
Level of hierarchy Equivalent number of central places Equivalent number of
marker areas dominated by higher order center dominated by higher order
center
1. Metropolis 1 1
2. City 3 4
3. Town 12 16
4. Village 48 64
5. Hamlet 192 256

3. The administrative principle

Christaller’s other suggested organizing principle was based upon the
realization that from a political or administrative viewpoint centers it was
unrealistic for centers to be ‘shared’.

99
 Market principle (a) and
transportation principle (b)

100
 Contributions of central place theory
1. It defines the ideal pattern of central places
2. It explains why an urban hierarchy exist in
the reality.
– A small number of high-order centers serve large
hinterland;
– Many low-order centers serve small hinterland.
3. It provides a basis for planning the size and
spacing of centers in newly-developing areas.

101
 Limitations
• A uniform transportation surface, the relative accessibility
between any two points is a direct function of their distance.
– In reality, there are transport routes and natural
barriers like rivers and coastal lines. Accessibility
is different over space
• Population is evenly distributed.
– In reality, population density is uneven. Other than
services, population is also related to
manufacturing and other activities.

102
 Limitations
• Each point has an equal chance of receiving a central place
– Physical conditions, historical legacy and government
policy may favour particular locations.
– The above factors will distort the ideal size, location and
spacing of central places.
• Highest-order center offers all the low-order services
– Some low-order service may not be offered in highest-
order center
– For example: traditional medicine/healers
• The centers of the same order will offer same range
of services
– The services offered by the centers of the same order may
be different 103
 Group assignment =30%
Group 1: problems of urban solid waste
management: the case of AA
Group2. Urban Housing conditions/problems in
Ethiopia
Group 3. problems of water supply and
sanitation
Group4. Urban problems of unemployment
Group 5. assessment of public transportation
problems in ----town
104
Group 6. the problems of urban good
governance
Group 7. an overview of the urban development
policy of Ethiopia
Group 8. problems of urban housing
affordability in Ethiopia/Africa
Group—you can give your own title

105
 General guideline
• Time given only 15 days---August 20/2018
• Maximum page= 10
• Content includes
1. Cover page-title, group name, content
2. Introduction: giving background information
3. Main body ---you can classify this into sub-chapters-
meaning of basic terms/ definition, classification, spatial
distribution/differences, magnitude of the problem,
affected community, etc.
4. Conclusion/summary
5. Reference 106
 CHAPTER THREE

URBAN AND REGIONAL ECONOMIC

ANALYSIS

107
INTRODUCTION
• This chapter focuses on the theoretical and practical aspects of city/town
development process and economic analysis.
• As to the origin and development of cities and towns, we can categorize
theories into two broad groups.
• 1. hydraulic theory, economic theory, military theory and religious
theories.
• 2. The second group of theories deals with the development process of
cities and towns; and the relationship between urban areas and the
surrounding rural settlements (periphery).
• The main theories under this group are economic base theory and
cumulative causation model.
• Moreover, the chapter will give detail on the stages and characteristics of
urbanization, counter urbanization, concepts of deindustrialization and
decentralization, core-periphery relation, growth poles, urban growth
and sprawl.

108
 Introduction
The socio-economic roles of Cities
• Citiesare the centres of knowledge, innovation and
specialization of production/goods and services.
• Cities facilitate creative thinking and innovation.
• High concentration of people in cities generates more
opportunities for interaction and communication,
promotes creative thinking, creates knowledge and
develops new ideas and technologies.
• Cities provide large efficiency benefits, which result in
unprecedented gains in productivity and
competitiveness.

109
• Cities provide more opportunities for learning and sharing.
• Cities facilitate trade and commerce by providing super
market places.
• Cities serve as production and services centres because the
production of many goods and services is more efficient in a
high-density urban environment.
• Cities provide consumers with more choices of goods and
services.
• Cities are the agents of social, cultural, economic, technologic
and political changes and advancement.

110
Why Cities Grow (or Don’t Grow)?
• Why do cities move from one stage to another? For what reasons is
Addis Ababa is Addis Ababa ; Cairo “cairo”?
1) Momentum
2) Local Advantages
3) Luck
4) Others?? Like policy
• What factors can act to limit urban growth?
– 1) Failure of Momentum
– 2) Competition
– 3) Lack of Natural Advantages
– 4) Lack of Cultivated Talent/Urban Management
– 5) Economic restructuring

111
City Development

• How cities develop (physical,economically);

and what would be the relationship between
urban centers and its surrounding suburbs and
rural settlements?
Here are two basic theories
1. Economic base theory and
2. Circular and cumulative causation model.

112
 Concepts of Economic Base
•Economic base analysis was developed by Robert Murray Haig
•Economic base implies businesses that generate employment in a community
or a geographical area. The economic base technique is grounded in the
assumption that the local economy can be divided into two very general
sectors:
1). Basic (or non-local) sector or
2). Non-basic (or local) sector.
•Basic Sector: this sector is made up of local businesses
(firms)that are entirely dependent upon external factors. For
example, Boeing builds and sells large airplanes to companies
and countries located throughout the world.
•Their business is dependent almost entirely upon non-local
firms. Boeing does not sell planes to families or households
locally, so their business is very much dependent upon exporting
their product.

113
 Cont’d….
• Manufacturing and local resource-oriented firms (like
logging or mining) are usually considered to be basic
sector firms because their fortunes depend largely upon
non-local factors, they usually export their goods.
• Non-basic Sector: the non-basic sector, in contrast, is
composed of those firms that depend largely upon local
business conditions.
• For example, a local grocery store sells its goods to local
households, businesses, and individuals. Its customers is
locally based and, therefore, its products are consumed
locally.
• Almost all local services (like drycleaners, restaurants, and
drug stores) are identified as non-basic because they
depend almost entirely on local factors.
114
 Non-basic Industries
• Jobs that are not part of the export sector
are dependent on serving the local
population. Examples:
o     Grocery clerk,
o     Divorce attorney,
o     Child care worker,
o     Utility line repair-person, etc.

115
• Economic Base Theory asserts
that the means of strengthening and
growing the local economy is to
develop and enhance the basic
sector. The basic sector is therefore
identified as the "engine" of the
local/urban/regional economy.
•

116
 Cont’d….
• By developing firms that rely primarily on
external markets, the local economy can better
protect itself from economic downturn/decline
• It is hoped that, these external markets will
remain strong even if the local economy
experiences problems. In contrast, a local
economy wholly dependent upon local factors
will have great trouble responding to economic
slumps.

117
How to differentiate? Analytical
tool
The “Location Quotient”(LQ)
 
N mi / N m
LQ mi =
Ni / N
where: Nmi = Employment in City "m" in
Industry "i"
Nm = Total Employment in City "m" in all
industries
Ni = National Employment in Industry "i"
N = Total National Employment in all industries
 Location Quotient Approach

LQ = Pctg of local employment in industry x

Pctg of nat’l employment in industry x
Where:
• LQ = 1 local industry is producing just enough output to satisfy local
consumption
• LQ > 1 local industry is producing an excess for export (excess over
1.0 represents basic industry
• LQ < 1 local industry not producing surplus for export, and the goods
or services must be imported

119
 The “Location Quotient”(LQ)
       LQ = 1.0 → same proportion of local workers work in
a particular industry as work in that industry in the
nation as a whole.
 
       LQ > 1.0 → local area is more heavily concentrated
in that industry than is the average city or region across
the country.
 
       In practice, it is usually considered that a location
quotient must be significantly greater than 1.0 in order
to indicate that the industry is part of the export sector
of the local economic base.
 Example:
Total US employment 130,000,000
US beverage industry 130,000
employment
Total Anytown employment 750,000
Anytown beverage employment 3,000

3,000 / 750,000 .004

Anytown B evg. LQ = = = 4.0
130,000 / 130,000,000 .001
Combine LQ analysis with large employer
analysis to identify the economic base and
forecast growth trends….
 The Service Sector and the Export Multiplier
• These jobs depend ultimately, directly or
indirectly, on the export base of the region.
• LQ  1.0 for non-basic occupations in most cities.
• The non-basic sector is also known as the “service
sector” of the region.
• If the export sector declined there would be less
need for the service sector.
• Since the service sector is dependent on the
export sector, the change in the demand for
service sector jobs is a function of the change in
the number of export sector jobs.
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122
Reserved.
 Economic Base Multiplier
Definition: It is the ratio of the total number of jobs
created to the number of basic jobs created.
• The economic base multiplier is the percentage
increase in the secondary jobs provided by industry to
a community, such additional jobs provide services
for the employees of a new company.
• A higher economic base multiplier implies a larger
effect of the basic job creator on the total number of
jobs.
• The method for estimating the impact of the basic
sector upon the local economy is the Base Multiplier.
123
• ET = Total Employment
• EX = Export Employment (Basic)
• EL = Local Employment (Non-Basic)

• ET = E X + E L

124
• An injection (export sales) increases income in
the area by an amount greater than the sale.
• The method for estimating the impact of the
basic sector upon the local economy is the
base multiplier, which is the ratio of the total
employment in year t to the basic sector
employment in that year.
• It can also be defined as the employment
multiplier that estimates the impact of local
basic sector employment on overall
employment growth.
125
 Cont’d….
Use of base multiplier

• For example - if the basic multiplier for

an area is two, this means that for every
new job in the basic sector there will be
an additional job created in the non-
basic sector.
• Estimates and projections of the base
multiplier allow analysts to calculate
impacts.
126
 Multipliers…

1) Employment Multiplier:

Net Total Employment Increase

Export Employment Increase

2) Population Multiplier:

Net Total Population Increase

Export Employment Increase
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127
Reserved.
  
Total employment Basic Total population
000 employment (000)
Basic & none basic (000)
 

1490.9
 
179.7
 
3056.9
 

     

1. What is the employment multiplier of the

region?
2. What is the population multiplier of the
region?

3. If the base employment increases 3000 over 3 years

what is the effect on the total employment and total
population? 128
 Multipliers…

• Employment multipliers are typically in the range

of 2.0 to 4.0.
• Population multipliers are typically in the range of
2.5 to 9.0.
Note: Multiplier effects go both ways:

• Loss of local export base jobs has a multiplier

effect on the overall local economy & population.
Note: Multiplier effects result only from changes in export
base employment (rippling through the local service
sector). © 2014 OnCourse Learning. All Rights
129
Reserved.
 2.2. Circular and Cumulative Causation Model
• Circular and cumulative causation is a theory developed by an
institutional economist named Gunnar Myrdal.
• The term cumulative causation is a combination of two words,
that is cumulative and causation.
• The first one i.e. cumulative implies something that is increasing
or getting bigger with more additions; while the second describes
the connection between two events or states such that one
produces or brings about the other, where one is the cause and
the other its effect
• According to models of circular and cumulative causation,
development and under-development are self-reinforcing and in
comparison, development depends on the relative weight of
unequalizing centripetal forces of attraction and suction and
equalizing centrifugal forces of diffusion (pull-push factors)
130
131
•  Centralizing city-causation ("centripital")
forces are counter-balanced by opposing
"decentralizing" ("centrifugal") forces.

•  The relative strength of the centralizing

and decentralizing forces differs for different
functions and activities.

132
 3.3.1 Centripetal Forces:
Would lead to fewer, larger cities…
Example, include the following

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133
Reserved.
 1) Economies of Scale
– Cheaper per unit to produce more stuff at one
place.
– i.e., Declining average costs with larger production
capacity.
– Due to “fixed” costs.
– Example: Auto factory with 200,000 cars/yr
production capacity is more efficient than auto
factory with 50,000 cars/yr capacity.

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134
Reserved.
2) Economies of Agglomeration
– Productivity advantage of physical clustering.
– Vertical & horizontal production linkages
(synergy/cooperation, ).

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135
Reserved.
3) Positive Locational Externalities
– Externality: positive and negative
– One firm benefits another firm nearby.
– Example: Trucking firm & Airfreight firm hub.

“Growth Spirals”, “Cumulative Causation”…

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136
Reserved.
 Centrifugal Forces
• Decentralizing forces that put a break on urban
agglomeration, result in a larger number of
smaller cities. They include:
• Congestion
• Pollution
• Crime
• High intra-urban transportation costs
• High rents & urban land costs
• High inter-urban transportation costs (with
greater distance between fewer larger cities)
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137
Reserved.
 The Balance of Centripetal & Centrifugal
Forces…
• Centralizing forces are relatively stronger in
comparison with decentralizing forces for some
types of activities than for others…
• National Government functions?…
• International financial services?…
• Corporate headquarters?…
• Corporate research facilities?…
• Light manufacturing?…
• Distribution?…
• Corporate branch offices, sales offices?…
© 2014 OnCourse Learning. All Rights
138
Reserved.
 Cont’d…
• G. Myrdal (1957) argued that economic growth in one area adversely
affects the prosperity of another.
• Once economic and social forces occur in favored region, development
produce tendencies toward disequilibrium, the differences in living
standards may persist and even widen over time.
• Wealth and labour move from poorer, peripheral areas to more central
regions of economic growth and the industrial production of wealthy
regions may well undercut the industrial output of the poorer regions.
• This draining of wealth and labour together with industrial decline is the
backwash, or polarization effect, and is a feature of core-periphery
relationships.
• Backwash Effect is basically means that if one particular area in a
country starts growing or developing, it causes people, human capital as
well as physical capital ((infrastructure, finance, machines etc.) from
other parts of the country to gravitate towards this growing centre.
---attracts more money/labour and technology

139
 Cont’d…
 Comparative advantages: advantages due to natural
resources and location, which creates the initial stimulus for an
industry to locate there.
 It refers to the ability of a party to produce a particular good
or service at a lower marginal and opportunity cost over
another
 Acquired advantages: due to cumulative causation the
reputation of the area is increased attracting other industry.
E.g. skilled workforce, improved infrastructure etc.
• The ability for an economic actor to produce a good or service
with fewer resources using knowledge or skills that are
acquired over time. For example, if Town A has more
electrical engineers or a better engineering school than Town
B, Town A may have an acquired advantage in the production
of electrical circuits, even if all other resources are the same.140
 Cont’d…
• This model helps to explain why some inner city
areas enjoy considerable prosperity, whilst others
display all the signs of urban deprivation and poverty.
• Services, investment and jobs are concentrated in the
core Central Business District (CBD), but accessible
inner city areas may benefit from a trickle down of
wealth from the core.
• For example, in some areas there may be a through-
flow of office workers to the inner city seeking low-
price lunchtime meals. Ex. Fast food in Piaza, AA
• The core also provides work for inner city residents.

141
142
 Causes of Urban Decay

1) Poor Urban Planning: involves planning for land use and transportation.
2) Redlining: occurs when services--such as banking, insurance and access
to jobs and healthcare- are denied to certain races or classes of people
through increasing the costs.
3) Poverty:
4) Suburbanization: aggravates urban decay by removing people who are
better off economically, leaving the area to those who are usually poorer,
which contributes to higher unemployment rates, a characteristic of urban
decay.
• There have been a number of schemes or strategies to reduce the problems
of urban decay. They have had mixed success.
 Comprehensive Redevelopment
 Urban Regeneration / urban redevelopment

143