The Growth Pole(s) Theory

Pertemuan 5 – MK Perencanaan
Wilayah

Dr. Paramita Rahayu ST., MT., MSc.

 The Growth Pole(s) Theory
 The main author of growth poles theory,
created in the 1950s is
Francois Perroux (1903–1987)
 He was a French economist
 He attempted to explain how modern
process of economic growth deviated from
the stationary conception of equilibrium
growth (Ricardian growth theory)
Debates in Growth Poles Theory
 Are we speaking of places or phenomena
that
 (1) have grown, that (2) are growing, that
(3) are predicted to grow, or that (in the
normative sense) (4) we wish to see grow
in the future?
 Growth Poles Theory challenges the
stationary conception of equilibrium
growth

 The situation in which there is no

tendency towards change, therefore,
structure and scale of economy remain
unaltered over time (Ricardian Growth
Theory)
 The Growth Pole(s) Theory
 Perroux based his idea Schumpeter’s
theories : The role of innovations and
large scale firms.
 Schumpeter’s analysis: development
occurs as a results of discontinuous spurts
in a dynamic world
 Growth Poles Theory
 The central idea of the growth poles
theory is that economic development, or
growth, is not uniform over an entire
region, but instead takes place around a
specific pole (or cluster). 
 Growth Poles Theory
 The growth poles are conceived as
". . . . centers (poles or focii) from which
centrifugal forces emanate and to which
centripetal forces are attracted. "
(1950,p.27).
 Thus, poles are likely to be firms or
industries, or groups of firms or industries.
 Growth Poles Theory
 Later, the concept will be narrowed(1). It is within these
poles that growth and change is initiated, while the
connections between the poles, in terms of the flows of
inputs and outputs, transmit the forces generated.

 The poles are therefore best regarded simply as sectors

of an economy represented by an input-output matrix in
which growth effects can be transmitted across the rows
and columns.
 Growth Poles Theory
 Growth in the matrix is directly related to the activity of
the poles themselves, and also to the degree of
interconnection between them. A condition of
'dominance' of many firms by one firm (or of many
industries by one industry) is an important feature of the
growth pole notion.

 'Dominance' is said to occur when the flow of goods and

services from industry J to industry I is a greater
proportion of J's output than is the flow from I to J of I's
output. In this case, firm I is said to be 'dominant‘ and
firm J 'dependent
 Growth Poles Theory
I K M O

P
 Growth Poles Theory
 A firm or industry characterized by all
three of the above features, that are,
 (1) High interaction with many other
firms, (2) a high degree of dominance,
and (3) great size, is said to be
'propulsive' and the firms or industries
dominated by it, 'mute' (Perroux, 1964a)
 Growth Poles Theory
 A further feature of the notion is the
emphasis placed on the size of the pole
(industry).
 The rate of growth or change is supposedly
directly related to the size of the industry,
since the bigger it is, the larger will be its
field of dominance over other industries
which sell to it or buy from it
 Growth Poles Theory
 Perroux claims that the growth pole notion
departs from equilibrium theory by
considering global product to be not only
the sum of the products of each of the
firms in the matrix, but also a function of
the effect on a given firm produced by the
input and output flows between this firm
and all others.
 Growth Poles Theory: Two Factors affecting
different growth
 The interrelations resulted in different growth because of two
factors:
 'technological external economies' (ekonomi yang dipengaruhi
oleh teknologi eksternal) and 'pecuniary external economies‘
(ekonomi yang dipengaruhi oleh kondisi ekonomi eksternal).
 The first arise when the output of a firm depends not only on
its own factor utilization but on the output and factor utilization
of other firms. (for instance, a firm benefitting from a labor
pool generated by others).
 The second, 'pecuniary external economies', arise in economic
development, when the output of a firm is affected by the
actions of other firms.
 Pecuniary external economy
ekonomi yang dipengaruhi oleh kondisi ekonomi eksternal

 "Expansion in industry A may also give rise to profits

 (a) in an industry that produces a factor used in industry
A,
 (b) in an industry whose product is complementary in
use to the product of industry A,
 (c) in an industry whose product is a substitute for a
factor used in industry A,
 (d) in an industry whose product is consumed by
persons whose incomes are raised by the expansion of
industry A" (Scitovsky, 1954, p. 149).
 Growth Pole Theory
if the propulsive firm induces growth, either
backwards or forwards, this growth can be either a
'lateral' or a 'derived' pole. The example used to
illustrate this is the nineteenth century textile
industry in Lyons, which induced (backwards) a
small chemical industry to provide bleach etc. (a
derived pole), and this in turn induced a
larger chemical industry providing basic heavy
chemicals (a lateral pole).
 Growth Pole Theory
 What type of industry would be optimal?
The first stage in answering this question
is to survey
 local resources, two of which are the supplies of cheap
labor and the proximity of raw material
 economies of scale for each element in the production
process;
 localization economies that might result from
agglomerating all or some of the processes at one point
—offset by transport cost considerations
 Growth Poles Theory
 4 basic types of polarization (Adamčík, 2002):
 technological and technical - based on the
concentration of new technology in the growth pole,
 income - the growth pole contributes to the
concentration and the growth of income due to
expansion of services and dependence on demand and
profit,
 psychological based on the optimistic anticipation of
future demand in the propelled region,
 geographical based on the concentration of economic
activity in a geographically determined space.
 Growth Poles Theory
 This pole is often characterized by core
(key) industries around which linked
industries develop, mainly through direct
and indirect effects.
 Core industries can involve a wide variety
of sectors such as automotive,
aeronautical, agribusiness, electronics,
steel, petrochemical, etc.
 Growth Poles Theory
 Direct effects imply the core industry purchasing
goods and services from its suppliers (upstream
linked industries), or providing goods and
services to its customers (downstream linked
industries).
 Indirect effects can involve the demand for
goods and services by people employed by the
core and linked industries supporting the
development and expansion of economic
activities such as retail.
 Growth Poles Theory
 The expansion of the core industry implies the
expansion of output, employment, related
investments, as well as new technologies and
new industrial sectors
 Because of scale and agglomeration economies
 near the growth pole, regional development is
unbalanced. Transportation, especially 
transport terminals, can play a significant role in
such a process. The more dependent or related
an activity is to transportation, the more likely
and strong this relationship
 Growth Poles Theory
 At a later stage, the emergence
of secondary growth poles is possible,
mainly if a secondary industrial sector
emerges with its own linked industries,
contributing the regional economic
diversity.
 Spatial Organization Elements
 If we use the idea of change and transformation of
spatial structures- what is involved?
 1. Spatial Competition- competing land uses in an
evolving urban area or two transport networks
competing for traffic
 2. Spatial Integration- coordination of spatial
activities to achieve harmony –networks
 3. Spatial Diffusion- how something spreads over
geographic space; vital mechanism to keep momentum
of development alive
 a. involves innovations- acceptance of new goods and
services by consumers and entrepreneurs
 Model of Typical Spatial Development

 S I- simple ports
 S II- transport
penetration
 S III- growth of
interior cities

 S IV- merge of
towns and high
order transport
Ideal Typical Sequence of Network
Development
A B C

D E F
 Impacts of Integration Processes on
Networks and Flows
Before Integration After Integration
International border
Network
Flows
Economic Production and Specialization
Region A Region B

Self Reliance

Regional Trade
Trade and
Transport

Trade and
International Transport
Trade
Product A
Product B
Product C
Product D
Product E
Gateway
 Development As Spatial Reorganization

 Need new set of spatial actions to achieve

spatial goals
 May involve new system of resource
allocation which implies some efficiency
 Certain spatial arrangements may be
expected to create a better means to
achieve national, regional and local goals
 Growth Poles Theory:
Deliberate Urbanization
Growth Pole

Key Industry
Linked Industry

Secondary Growth Pole

Secondary Industry
Linked Industry
 Growth Poles
 Growth poles - In a spatial sense this
refers to a geographical node or clustering
of economic activity. The implication is
that spatial concentration is m ore efficient
and induces growth. In an aspatial sense,
it refers to a set of industries generating
growth in an economy around a leading
industry.
 Deliberate Urbanization
 the notion of creating urban places in
particular areas or regions in order to
stimulate growth and serve as nodes to
service a surrounding hinterland John
Friedman, 1968)
Transport Corridors and the
Regional Spatial Structure
A B C

Order Specialization and Articulation Point

interdependency
High Low High Low Distribution
Current case study applies GPs
Theory
ROMANIA’S
DEVELOPMENT
REGIONS
 Nord Vest
Nord Est

Centru
Vest

Sud Vest Sud Est

Sud

Bucureşti-Ilfov
 ROMANIAN CONTEXT I
 Romania’s GDP = 42% of the EU average

GDP in 2005 GDP in 2005

Nr. crt. Region
Million EUR EUR/inhab.
1 NORD EST 9404.7 2519.1
2 SUD EST 9136.1 3210.8
3 SUD 10077.6 3028.0

4 SUD VEST 6735.2 2919.8

5 VEST 7989.1 4136.9

6 NORD VEST 9568.6 3499.1

7 CENTRU 9478.1 3742.3

8 BUCUREŞTI-ILFOV 17197.5 7775.9

9 ROMANIA 79586.9 3680.5

Source: EUROSTAT
 GDP
per region
 ROMANIAN CONTEXT II
 Similar discrepancies in the levels of urbanization…

Total Urban Percentage of Urban

Nr. crt. Region Population Population Population
2006 2006 2006

1 NORD EST 3.732.583 1.629.250 43,6%

2 SUD EST 2.837.834 1.573.520 55,4%

3 SUD 3.312.342 1.379.073 41,6%

4 SUD VEST 2.293.895 1.092.922 47,6%

5 VEST 1.927.229 1.223.730 63,5%

6 NORD VEST 2.730.132 1.449.635 53,1%

7 CENTRU 2.530.818 1.513.670 59,8%

8 BUCUREŞTI-ILFOV 2.219.532 2.052.138 92,5%

9 ROMÂNIA 21.584.365 11.913.938 55,2%

Source: Romanian Statistical Yearbook 2007
Unemployment
and FDI
% per region
 ROMANIAN CONTEXT III
 … and in the levels o f FDI and unemplo yment

 these internal imbalances have been increasing

FDI
Unemployment FDI at the end of
Nr. crt. Region Rate at the end of 2006 2006
2006 Million EUR %
1 NORD EST 6.2%  411 1.2% 
2 SUD EST 5.6%  2653 7.7% 
3 SUD 6.4%  2228 6.5% 
4 SUD VEST 7%  238 2.7% 
5 VEST 4.1%  1948 5.6% 
6 NORD VEST 3.6%  1570 4.6% 
7 CENTRU 6.1%  2559 7.4% 
8 BUCUREŞTI-ILFOV 2.2%  22205 64.3% 
9 ROMANIA 5.2% 34512 100% 
Source: Romanian Statistical Yearbook 2007
 ROMANIAN CONTEXT IV
 all eight regional capitals are specialized in one or
several economic sectors, with the potential of
increasing if provided with a better business
environment

 all regions are rather balanced

demographically, with large rural populations
spread around spatially dispersed regional centers

 …so each regional center has the potential to

become a growth pole
 STRATEGY CHOICE

 A growth pole policy can:

 - allow a fair chance for all regions
 - channel the funds into investments with
greater economic return.
 - ensure impact and visibility

incremental approach - mid-term

evaluation
 IDENTIFICATION OF POLES
 the 7 (8-Bucharest) regional capitals have a clear
potential of becoming growth poles, but other cities
of Romania rightfully claimed their status as
potential growth poles too  considerable pressure

 a decision was taken to limit the number of

growth poles to 7, in order to maintain the
credibility of the policy and avoid any suspicion of
supporting a clientele policy

 nomination by means of government decision

 INSTITUTIONAL SETUP
 strategic national coordinator responding directly to
the Prime Minister; Ministry of Development as responsible
body for the policy implementation

 inter-ministerial working group, under the auspices of

the National Coordination Committee  to ensure policy
coherence sustainability and appropriate funding

 seven commissioners/managers, at the level of the

Ministry of Development, one for each growth pole  to
tackle variable or insufficient administrative capacity at
local level
 STRATEGY DESIGN

Local authorities create integrated development plans

- based on “running engines”
- with spillover effects over the region

Ministry of Development
- analyzes viability of the plans
- integrates them

Regional Manager level ensures coherence and coordination

- with other OPs
- and with the other major strategies of Romania
 FUNDING
 Guaranteed by government decision and
by decisions of the National Coordination
Committee