Addis Ababa University

School of Graduate Studies

Department of Geography and Environmental
Studies
Course Title: The Urban and Regional Economy(GeES 641)
Credit Hrs: 3
development )
Urban and Regional Study in Geography
•Geography can be approached by considering two contin-
uum: a human-physical continuum and a topical- urban con-
tinuum
•Topical/thematic/systematic fields view particular categories
of physical or human phenomena as distributed over the
Earth
•Regional geography is concerned with the associations
within regions of all or some of the elements and their asso-
ciations.
•Regional geography deals with the study of spatial units
characterized by more or less homogenous physical, biologi-
cal, demographic, sociocultural and economic aspects and
attributes as located on the surface of the Earth.
The concepts of region and urban
 Region:
 A region could be recognized as uninterrupted area pos-
sessing a kind of homogeneity/distinctive characteristics in
the core but with vague situation in the periphery
 Regions are geographic entities that allow making spatial
generalizations, and studying their spatial characteristics.
 Regions are based on some criteria for the purpose of
constructing /classifying and studying spatial characteris-
tics
Bases of Classification of geographic regions
1. Physical/natural and human properties and homogeneity
Formal regions could be physical regions-delineated on
the bases of similarity of natural characteristics that provide
the space and resources for human use or cultural regions
where people who share similar cultural traits and com-
plexes are living in a relatively close proximity
2. Functional interaction of the features
Functional/ nodal- city with its surrounding suburbs
•Functional region is an area defined by specific function or
activities interconnecting the parts of an area and so in-
cludes areas that have been organized to function as a unit
politically, socially or economically
•It consists of an area where activities focus on a single
node and from which movement to or from the node occurs.
• Characteristics of regions:
- Area
- Boundaries ( natural or manmade features, geometric)
- Location (site or situation)
- linkages with other regions (mobility, transport, trade)

 Regional Analysis is concerned with looking at the associa-

tions with in regions of all or some of the human, physical
or biological elements, particularly in regard to their interre-
lationships and patterns.
 Urban
 Urban centers could be defined as closely built-up settle-
ments composed of a minimum but substantial size and
density of population that is engaged mainly in non-agri-
cultural activities and consisting the provision of adminis-
trative and public facilities such as municipality, police sta-
tion and other related services.
 Associated with towns/cities
 The distinction between urban and rural population/ set-
tlement is arbitrary as there is no clear point (or line)
marking the continuum from scattered dwellings/ villages
to where urbanity begins and rurality vanishes.
 Urban as an area and in area
• Commonly used criteria to classify settlements as urban:
 Threshold size of population
 Density of population and housing
 Predominant type of economic activity
 Administrative function or structure, chartered municipality
 Urban activities/services and amenities
• economic, political and social organization.
• Cultural complexity: complex culture, high fashion, music and
literature are more associated with urban areas than rural ones.
• Social interaction: Secondary contacts define most interactions
in urban centers, while primary group contacts form the main
feature of social interaction in rural areas.
• Social stratification & heterogeneity: Urban populations are
more socially stratified and heterogeneous compared to rural
communities.
• Social mobility: urban dwellers often move more
rapidly from one social stratum to the other than their
rural counterparts.
• Division of labor and specialization: urban centers
have very high division of labor and specialization un-
like rural areas .
• Social control: Urban areas rely on formal institutions
for social control compared to rural communities
which rely on the greater internalization of (informal)
societal values and norms, which permit higher levels
of social control.
• Levels and standards of living: although this is not
true for all places and periods, urban centers tend to
offer higher levels of living than rural centers, espe-
cially in developing countries.
The concept of regional and urban economy
• The fields of regional and urban economics analyze the
spatial organization of economic activities, and consider
the impact of location and distance on economic activity.
• Regional economics helps to determine where different
types of economic activity will prosper:
– which economic activity locates where;
– why firms and households locate in some places but not
in others, and
– why some activities thrive in areas that are toxic to other
activities.
• Urban economists, on the other hand, are interested in
the economic relationship between peripheral urban ar-
eas & the major city as well as between land use patterns
and economic activity within a city.
 Origin of urban centers
• Before 10, 000 years –hunters and gatherers had no per-
manent settlement
• About 10,000 ya in the Neolithic Period, the agricultural
revolution that resulted in surplus production & division of
labour assisted development of relatively fixed settlement.
• The surplus allowed part of the population to specialize in
non-farming activities. Administrators were needed to orga-
nize social activities, traders exchanged surplus goods with
other settlements, craftsmen started the making of farming
equipment and household articles, legal systems an army
for defense came in to being
• Urban centers are assumed to flourish about 5,000 -6,000
years ago along the fertile river valleys.
• The towns were small because of the inability of their agri-
cultural hinterlands to provide sufficient quantities of food
and other necessities to support large nonagricultural popu-
• The earliest cities probably originated in the Tigris and Eu-
phrates River Valley areas of Mesopotamia
• Then early cities appeared in Egypt (300BC), Indus
Valley(200BC), Huang He River (1500 BC), Southern Mex-
ico (1st AD) and in East and West Africa
Factors related to emergence of early towns
A.Agricultural surplus
B.Defense needs
C.Religious causes
D.Trading requirement
 Proper ecological setting: fertile areas often on river
banks with water and workable soils; natural transportation
features, mineral resource availability, building materials
availability, defensive sites were considered for city forma-
tion.
Cities diffused from early hearths facilitated as result of
trade along transportation routes, transportation improve-
ments, military conquest, colonization
• In its modern form, urbanization has gone hand in hand
with the Industrial Revolution.
• For the growth of modern cities, increasing employment
in service occupations, cultural attractions such as art gal-
leries, and libraries were also instrumental.
• Migration and urbanization are closely intertwined.
• Migration received extensive attention in the literature
because of its implications for urbanization, the emphasis
being on rural-urban migration
• Urbanization (proportion of population living in urban ar-
eas at a given time or an increase in the percentage of a
population living in urban areas between two given
times) is not synonymous with urban growth since cities
will grow larger without changing the proportion of the
population living in urban areas if rural and urban popula-
tions grow at the same rate.
• It is the means by which the type of social change re-
quired for modernization in less developed countries can
be accomplished
• Urbanization can occur as a result of internal rural-urban
migration, natural increase, international urban migra-
tion, or reclassification of places from rural to urban.
 Urban functions
• Urban centers provide specialized productive activities and
services for its inhabitants and for those in its hinterland
• All towns are multi-functional although one particular func-
tion may dominant than others
• Functions may change over time and the function that was
originally very important with regard to a particular town
may no longer be of major significance.
• Major urban functions:
 Administrative (capital cities, district/regional centers)
 Defense (fortress towns, garrison towns, naval bases)
 Recreational (tourist resorts, holiday centers)
 Production (manufacturing, mining, fishing, )
 Commercial/distribution(market towns, ports, import-
export towns)
 Cultural (University towns, Cathedral towns, Art cen-
ters, pilgrimage centers)
 Functional zones within a city
• Central Business District
 most accessible business center containing peak land
value with large wholesalers and retailors, radial network,
 high density core with tallest buildings, high vertical and hor-
izontal movement with elevators and escalators,
 Marked change in daytime and nighttime population
 Professional workers and specialized services; cultural and
entertainment center,
 Administrative center for government offices( Mayor’s of-
fice, Court House)
 organizing center about which the rest of the city is struc-
tured; tends to be dynamic )
• Zone of transition
 Often deteriorated area where buildings are allowed to de-
cay requiring renewal
 An area of mixed commercial and non-commercial landuse
 Locationally separating the retailing heart of the city from
surrounding residential neighborhoods or heavy industrial
district
 Accommodates off-street parking, warehousing, light man-
ufacturing, wholesaling with stocks, transportation termi-
nals, multifamily residences
• Industrial zones- found near outskirts of the city
• Residential zones- an area where most of the resi-
dential houses are located
Basic and non- basic urban functions
•Every city generates income as a result of its activities
which could be divided as basic and non-basic. The activi-
ties are interlinked
A.Basic economic activities generate income for the resi-
dents of the city through selling goods and services pro-
duced within the city to outside. They represent the engine
for economic growth which include manufacturing activities
and tradable eservices
B.Non-basic economic activities circulate income within the
city rather than bringing in income from outside. These in-
clude retailing and other consumer services
 Theories/Models of urban structure
Different models have been developed to generalize about
patterns of urban land use within the city
A.The concentric theory
•Developed by the sociologist E.W. Burgess in1925.
• According to this model, a city grows outward from a central
point in a series of rings representing social groups.
•It is based on the notion of competition between social
groups to maintain social distance
• The Rings
 The innermost ring represents the central business district
 The second ring is the zone of transition which contains industry
and poorer-quality housing, surrounds it.
 The third ring contains housing for the working-class and is called
the zone of independent workers' homes.
 The fourth ring has newer and larger houses usually occupied by
the middle-class called the zone of better residences.
 The outermost ring is called the commuter's zone representing
people who choose to live in residential suburbs and take a daily
commute into the CBD to work
The concentric theory
 B. Sector Model
This theory of urban structure was proposed in 1939 by an
economist named Homer Hoyt who conducted a variety of
empirical studies of urban land markets and came up with al-
ternative visual model of urban spatial structure
 The model proposed that a city develops in sectors instead
of rings as certain areas of a city are more attractive for vari-
ous activities,
Modification of the concentric ring model where a housing
center intrudes into the center of the city populated by wealth-
ier people who have a high opportunity cost associated with
travel and who locate downtown in an effort to minimize travel
time for work, entertainment, & social events...
 As cities grow, high income groups settle close to trans-
portation routes on the periphery, on aesthetic views such as
hilltops, river bluffs forming radial than zonal expansion
Sector Model
 C. The Multiple Nuclei Theory
• Developed by geographers Chauny Harris and Edward
Ullman in 1945.
• According to this model, a city contains more than one
center around which activities revolve that shape land val-
ues and land uses.
• The nodes could have different functions such as business
parks, institutions like hospitals/universities that signifi-
cantly affect their surroundings by attracting related activi-
ties
• Diversified terrain features effects the activities, develop-
ment, and direction of growth of an urban area.
• A particular activity will locate itself where maximum profit
can be earned. Transport cost& proximity to market
The Multiple Nuclei Model
 THEORIES OF (URBAN/ REGIONAL) DE-
VELOPMENT
• According to Adam Smith, the fundamental
economic determinant of development is the
rate of capital formation which depends on
savings.
• Surplus of production is necessary for sav-
ings and capital accumulation.
• Surplus is possible when productivity is high.
• Division of labour increases productivity, re-
duce costs and encourages economic devel-
opment.
 Lewis Growth Model
• Lewis developed a systematic theory of economic development
with unlimited supplies of labour at subsistence wage; scarcity of
capital.
• In a typical underdeveloped economy, there are two sectors:
• (i) Large subsistence sector or indigenous traditional sec-
tor, which is characterized by abundant labour, disguised unem-
ployment, very low productivity of labour. It is mostly a self-em-
ployment sector.
• (ii) A small capital sector, which uses reproducible capital,
modern techniques, employs labour on wages with a profit motive.
• Arthur Lewis suggested a model in which it is possible to achieve
development by transferring labour from the subsistence sector to
the modern sector. He assumes that the wage rate in the modern
sector is slightly higher than that in the subsistence sector. labour
from the subsistence sector will be employed in the modern sector
and profit will be maximized which will again be reinvested in the
modern sector. This process will continue until all the surplus is
absorbed in the modern sector .
Balanced and unbalanced Growth Theory
• Balanced growth theory argues simultaneous expansion of a large number
of industries in all sectors and regions of the economy.
• a large number of industries develop simultaneously so that each gener-
ates a market for one another.
• The benefits of growth are spread over all sectors and ideally over all re-
gions.

• Unbalanced growth theorists argue that the government may not have suf-
ficient resources to promote widespread and coordinated investments in all
sectors and regions.
• Those with the greatest number of backward and forward links are priori-
tized. Resources should concentrate on strategic industries with signifi-
cant forward linkages - creating essential inputs for other key firms in the
economy; and backward linkages - firms buy industrial inputs from a large
number of domestic firms
• Developing domestic industries replaces imports, import substitution, and
so improves the balance of payments.
 Dependency Theory
• Paul Baran developed dependency theory from Marxian analysis
• Dependency theory underscores that development is a result of underde-
velopment, and underdevelopment is a result of development.
• For underdeveloped nations (peripheries) to develop, they must break their
ties with developed nations (center) and pursue internal growth.
• Resources are extracted from the periphery and flow towards the states at
the center in order to sustain their economic growth and wealth.
• It posits that the cause of the low levels of development in less econo
mically developed countries is caused by their reliance and dependen
ce on more economically developed countries; surplus drawn off by
MNCs, no profit left for reinvestment
• The premises of dependency theory are: poor nations provide a desti
nation for obsolete technology, and markets to the wealthy nations
• First World nations actively perpetuate a state of dependence through
economics
, media control, politics, banking and finance, education, culture,
sport,
• Attempts by the dependent nations to resist the influences of depen-
dency often result in economic sanctions and/or military invasion
and control.
• The dependency theory traces the problem back to colonialism,
• Central to the theory is the core-periphery relationship to explain the
perpetual lack of development in the periphery
• The core-periphery model is a spatial framework, which
says that pre-industrial order is characterized by small in-
equalities in wealth and development as regions function
in relative isolation from each other.
• The beginnings of industrialization bring the concentra-
tion of investment in a single strong center (core or growth
pole) at the expense of more traditional periphery domi-
nated by primary economic activities.
• The periphery supplies raw materials at cheap prices to
the urban industrial core and the core supplies expensive
manufactured goods back to the periphery. Inequalities
are great.
• Later, the simple core-periphery structure is transformed
into a multinuclear structure with strong sub centers
emerging in the periphery.
• Ultimately there arises a mature and functionally intercon-
nected space economy where regional inequalities are
small.
• The growth/decline of inequalities between rich and poor regions are
driven by a process of concentration (polarization effects) and decon-
centration (tricking down effects).
• Polarization effects reinforce growth in the core at the expense of the pe-
riphery through circular and cumulative causation create a self –sustain-
ing “snowballing” or ‘multiplier’ effect.
• Mechanisms:
1) capital investment (new industries and services) is attracted to the core.
2)young , dynamic and skilled and semi skilled workers migrate to the core .
3) More innovation in the core leads to the creation of new or enlarged in-
dustries, which, in turn, bread more innovation.
4) faster growth in the core is multiplied into a more service-rich support en-
vironment with more schools, hospitals, shopping centers, good housing,
modern transport system making it more attractive for future economic
activity and further immigration..
• Eventually, growth in the core stimulates demand for goods and ser-
vices from the periphery and regional sub centers emerge.
• Convergence will occur as trickle-down effects work to diffuse bene-
fits outward from the center
1.higher prices paid for needed materials
2. dispersion of technology to branch plants
3. contract suppliers in lower-cost regions of production
4. High density, congestion, higher labour costs, environmental decay
and diffusion of innovation encourage the outward dispersion of
growth.
• The core periphery model has been used to explain both national and
international differences in economic development.
Growth Pole Theory
• Originated from British Economist, Sir William Petty
(1623-1687), who was fascinated by the high growth
in London during the 17th century and conjectured
that strong urban economies are the backbone and
motor of the wealth of nations.
• However, the French Economist, Francois Perroux
(1903-1987), is credited with formalizing and elabo-
rating on the concept.
• Growth pole theory, assumes that growth does not
appear everywhere at the same time, but it manifests
itself in “points” or “poles” of growth; and latter
spreads by different channels and eventually affects
the economy as a whole.
• A growth pole is a point of economic growth. Growth
poles are usually urban locations, benefiting from ag-
glomeration economies, and should interact with sur-
rounding areas, spreading prosperity from the core to
the periphery.
• Growth poles in geographic space may be of two
types.
1. Natural pole which results from little or no gov-
ernment planning and is more the result of a spatial
concentration arising from a high marginal productivity
of capital and agglomerative economics.
2. planned pole - results due to government inter-
vention and investment controls. These poles are
usually created to develop new resource frontiers, to
stimulate growth in older agricultural regions, to redi-
rect rural- urban migration away from a few major ur-
ban areas by creating alternative employment oppor-
tunities, and to promote a more balanced regional de-
velopment
Growth poles are constituted by expanding industries in a
given region, inducing development at other points in
space, or by a geographic agglomeration of propulsive ac-
tivities. The process of geographical diffusion has a criti-
cal role in the growth pole theory.
Industrial Linkages and the Multiplier Effect
• Industries made financial savings by locating close to and linking with
other industries. Industrial linkages may be divided into backward link-
ages and forward linkages. A factory, for example, can have a backward
linkage with firms providing raw materials or component parts and for-
ward linkages with firms further processing the product or using it as a
component part.
• Industrial linkages result in reduced transport costs; use of waste product
from one industry as a raw material for another; use of energy given off by
one process to be used elsewhere; economies of scale where several firms
buy in bulk or share distribution costs; improved communication, service
and financial investment; high levels of skill and further research.
• A large specialized type of industry in an area generates a multiplier effect
as its success attracts other forms of economic development creating jobs,
services and wealth and spending power of the local population.
• With the emergence of growth poles, there will be an influx of migrants,
entrepreneurs and capital along with new ideas and technology.
Agglomeration Economies
• Agglomeration economies are, savings that result from concentrat-
ing economic activities in one place or adjacent to one another as
it creates cost reduction s by minimizing transport costs and max-
imizing access to suppliers.

1. Transfer Economies
• inter-industry linkages or transportation savings that a plant enjoys
by locating close to other plants. Manufacturing tends to locate in
nodes on a transportation network or plants locate near one another
to benefit from successive stages of production.
2. Localization Economies
• cost reductions arise from a spatial concentration of plants in the
same industry. Localization economies occur when an area devel-
ops a specialization in certain type of product. Local financial in-
stitutions and utilities, suppliers of specialized items and business
services, utilities and the labour force that develop the special ex-
pertise for this product, up to date information are all available
and accessible.
 Comparative advantage in production
• The costs of production differ among regions because
resources at their disposal are not distributed equally.
• Efficiency requires that areas with lower opportunity
costs of producing a given good export that good to ar-
eas where production costs of that good are higher.
• A region is said to have comparative advantage in pro-
ducing a good, say electronics, if its opportunity cost of
producing it is lower than that of the other region with
which it trades.
• Comparative advantage suggests that if regions special-
ize in producing goods for which they have lower costs
and exchange those goods for products for which they
higher costs, regional output and income will increase.
3. Urbanization Economies
• cost savings derived from an increase in the size of the place where
plants are located.. Bigger cities provide bigger markets for a firm’s
products and provide many goods and services. The economies of
scale are external to the plants in many industries as the industries
share the burden of certain costs to all. A large urban area has a large
flexible labour pool; developed commercial and financial services;
public services like water, health, airport, fire and police protection.
4. Internal Economies of Scale
• savings a plant enjoys from increasing its scale of operation or size
where average production cost of items manufactured normally de-
creases because of large quantity purchase, efficient use of labour
and machines and bulk distribution.
• large plants serving a wide market and drawing on distant resources
like automobile industry benefit more.
• As the size of the plant increases, at some point, the average cost of
production per unit may begin to rise as inefficiencies and disec-
onomies are encountered.
 Locational Theories
Von Thunen's Location Theory
• agricultural land use patterns change with dis-
tance from the centrally located market.
• a farm product that achieves the highest profit/
high rent- paying ability outbids other products
in the competition for location which should be
relegated to an outer zone.
• book entitled ‘The Isolated State’ in 1826
• first to propose the idea of opportunity cost.
Eg. Opportunity cost for a commercial land
owner farmers
 Assumptions and Principles
A. isolated state- a single urban market (central
city) whose needs are supplied by the surround-
ing agricultural hinterland.
B. Isotropic plain,- cultivable land of homogenous
physical character
C. A uniform transportation surface- movement
costs increase with distance, market served by
one mode of transport (horse and cart).
D. The farmers acted as 'economic men' –profit
maximizers, having equal knowledge of the
needs of the market.
•
 Principles
• with increasing distance from the market the type of land
use varied and the intensity of production decreased.
• emphasized on the relationship with three variables: dis-
tance of farms from the market, price received by farmers
for their product and economic (location) rent.
• Locational rent is the difference between revenue received
by a farmer for a crop grown on a particular piece of land
and the total cost of producing and transporting that crop.
• the nearer the farmer to the market the greater his return
from the sale of his produce.
• highest returns from land near the market and the greater
competition for such land escalates its price &encourages
farmers for intensive cultivation.
LR= Y(m-c-td)
LR=M-(C+T)
where R= locational (economic) rent
Y= Yield per unit of land
m= market price per unit of commodity
d= distance from the market
c= production cost per unit of land
t= transport cost per unit of commodity
• Relationship between locational rent and dis-
tance from the market
R

Profit is absorbed at X

M X
(Market) Distance from market (Margin of cultivation)
• Economic rent falls with increasing distance from the market until a
point beyond which it is not worth using the land for the crop (mar-
gin of cultivation) - zero profit.
• The point at which one type of land use is replaced by another is
called the margin of transference.
• Locational rent will be at its maximum at the market where there are
no transport costs.
• If market price rises, transport costs or cost of production decrease,
profits will rise and the margin of farming will expand.
• Von Thunen suggested that bulky crops like potatoes and perishable
goods such as vegetables and dairy products should be produced
closer to the market in order to minimize transport costs and loses.
• Patterns of Land Use around the Market
A. Intensive market gardening and dairying – perishability and bulki-
ness necessitate production close to the market.
B. Wood - major source of fuel and building material; high cost of
transporting such a bulky good .
C. Intensive cultivation of crops with crop rotation (rye, potatoes,
clover, barley) with no fallow period.
D. Cereal farming with less intensive means, rotation system .
E. Extensive farming -cultivation of less bulky and less perishable ce-
reals that could bear the high transport cost.
F. Extensive livestock farming (ranching) at the outer most edge of the
cultivated land . Animals are self-transporting; and longer keeping
dairy products (butter, cheese) are less bulky and cheap to transport.
 Criticisms of Von Thunen's Model
 Oversimplification
 Out-datedness
 Failure to recognize the role of government
 Failure to include behavioral factors

The Value of von Thunen's Work

 Distance from the market still influences the relative location
of different agricultural products
 Changes in market demand because of population growth
bring changes in methods and the overall pattern of farming
(yields could increase on existing agricultural land or new
lands could be taken in with successive zones of cultivation
being pushed progressively outwards.)
 Models/Theories of Agricultural Development
• Used for agricultural policy formulations to realize the develop-
ment of the sector
A. The Conservation Model of Agricultural De-
velopment
• The assumptions of the theory are:
• (i) that land for agriculture production is scarce and becoming
more so;
• (ii) soil exhaustion is possible,
• The theory proposed that as land scarcity increases, poorer land is
used, causing the marginal productivity of labor and of land to de-
cline (law of diminishing returns). To prevent the declines, high
priority is attached to maintaining soil productivity or conserving
soil.
B. The Urban-Industrial Impact Model
• Agricultural productivity is a function of distance from urban and
industrial area.(cost of transportation)
• The model is based on Von Thuenens demonstration that distance
from an urban market influences both the intensity of cultivation
and the mix of crops grown.
• The model argues that industrial development stimulates agricul-
tural development by expanding the demand for farm products,
supplying the industrial inputs needed to improve agricultural
productivity, and drawing away surplus labor from agriculture.
• The model affirms also that non – farm labor market is an essen-
tial prerequisite for labor productivity in agriculture and im-
proved income for rural people
C. The Diffusion Model
• Appreciable increases in agricultural production are obtained by:
(1) increasing the flow of information to farmers about new agri-
cultural technology and new institutional arrangements such as
credit;
(2) teaching tradition – how to make more economically rational
management decisions about the use of resources they have ac-
cess to. Extension workers and other means of communication
and diffusion like radio and newsletter etc are used to carry out
diffusion.
D. Cultural-Change-First Model
• The model identifies values and institutions, as well as
technology, as the fundamental variables affecting agri-
cultural development.
• Traditional personalities and behaviors can be barriers to
economic growth.
• For development to occur, nations need to change their
value orientation and some of their traditional institu-
tions.
Industrialization and Manufacturing
The Industrial Activity
Industrial Location Factors
• The aim of the manufacturer is to produce at the lowest
cost; to sell as widely as possible; and to make the maxi-
mum profit.
1. Market: weight adding (eg. Brewing) and assembling plants;
perishability
2. Labour Supply: need for specialized and skilled labour;
labour intensive
3. Energy (Power Supplies): some energy dependent indus-
tries,
4. Raw materials : when weight (bulk) is greatly reduced dur-
ing processing; when the industry uses perishable raw ma-
terials
5. Government Policies, land, environmental considera-
tions and Personal preferences
6. Agglomeration Economies
 Industrial Development Strategies
1. strategies that encourage growth through market and
other economic forces to guide its implementation; vs
strategies that seek to stimulate industrialization by gov-
ernmental efforts including tax, fiscal, and monetary policies
and research.
2. Strategy by introducing external capital vs industrial de-
velopment strategy by utilizing local resource
3. Import Substitution vs Export Oriented Industrialization
Import Substitution
•Import Substitution' (IS) refers to a policy that eliminates the importation
of the commodity and allows for the production in the domestic market.
•It grants high levels of protection to domestic producers, largely closing
these economies to international trade
•The objective of this policy is to bring about structural changes in the
economy.
•Import Substitution Industrialization (ISI) had its origins in the writings of
List (1841), who in his theory of productive forces, outlined the 'Infant In-
dustry Argument'.
•Although initial costs of production may be higher than former import
prices, the industry will eventually be able to reap the benefits of large-
scale production and lower costs (the so-called infant industry argument
for tariff protection) or that the balance of payments will improve due to
imports of fewer consumer goods
• At the beginning of the import substitution process, it is of-
ten the consumer goods that are sealed off from foreign im-
ports as the cost disadvantage is comparatively less in this
sector as compared to either capital goods or intermediate
goods.
• Consumer goods are also considered inessential for devel-
opment and an increase in their cost will not affect other
production units as would the capital/intermediate goods.
• The policy of import substitution is achieved through dis-
crimination of capital goods against consumer goods by tar-
iffs, quotas, exchange control barriers, exchange rate poli-
cies and fiscal and credit policies
 Export Oriented Industrialization
• The failure of import substituting strategies to meet the
goals of industrialization in many countries led to a shift to
export oriented industrialization strategies.
• The hall mark of the export oriented industrialization strat-
egy was "promotion" in contrast to the "protection" that
characterized the import substituting strategy.
• Promotional measures in developing countries for manu-
facturing industries may include improving financial and
credit institutions, expanding infrastructure facilities, re-
warding external economies conferred on other industries,
and the provision of subsidies for training of labour.
• Developing countries are supposed to attempt to harness
the prospects offered by international trade by specializing
according to the tenets of comparative advantage.
• The benefits of the Export Promotion strategy:
 it overcomes the smallness of the domestic market and al-
lows a developing country to take advantage of scale
economies;
 production of manufactured goods for export requires and
stimulates efficiency throughout the economy;
• It expose the developing economies to the fresh air of com-
petition and innovation and benefits from large flows of for-
eign capital.
 the expansion of manufactured exports is not limited (as in
the case of import substitution) by the growth of domestic
market
Industrial Linkages and the Multiplier Effect
• Industries made financial savings by locating close to and linking with
other industries. Industrial linkages may be divided into backward link-
ages and forward linkages. A factory, for example, can have a backward
linkage with firms providing raw materials or component parts and for-
ward linkages with firms further processing the product or using it as a
component part.
• Industrial linkages result in reduced transport costs; use of waste product
from one industry as a raw material for another; use of energy given off by
one process to be used elsewhere; economies of scale where several firms
buy in bulk or share distribution costs; improved communication, service
and financial investment; high levels of skill and further research.
• A large specialized type of industry in an area generates a multiplier effect
as its success attracts other forms of economic development creating jobs,
services and wealth and spending power of the local population.
• With the emergence of growth poles, there will be an influx of migrants,
entrepreneurs and capital along with new ideas and technology.
Guiding principles in industrial development
• Enhancing productivity and competitiveness
• Equitable development
• Technology and innovation
• Employment Creation
• Environmental Sustainability
• Education and human resource development
• Promote inter and intra-sectoral linkages: promote basic
industries with multiplier effect; encourage development
of ancillary industries,
• Promote public-private partnership
• Reduce to a minimum the amount of material used to
manufacture a product. E.g. the quantity of steel in motor
vehicles has been significantly reduced over the past two
decades
 Principles con’td

• Reduce to a minimum energy use in the production

process and switch to alternative or renewable energy
sources.
• Switch from toxic to non-toxic materials, including lead-
free gasoline and degradable pesticides.
• Utilize waste materials from one industry or one stage
of manufacturing as raw material in another.
• Design products which may be reused or upgraded
rather than thrown away as waste.
• Manufacture products from recyclable materials, such
as aluminum beverage cans or recycled plastic cans.
• Manufacture products which are degradable having
minimal impact on the environment during their life cy-
cle and whose byproducts are non-toxic.
• Quality infrastructure and sustainability
 Benefits of Industrial Development
 Economic stability
 Increasing foreign exchange revenue & international trade
 Utilization of natural resources
 Supports agriculture and improves agri productivity
 Promotes and supports other sectors/services/of the economy
 Promotes defense
 Improves balance of payments
 Improves investment and savings
 Promotes urbanization
 Provision of employment
 Greater labour specialization
 Reduction in rate of population growth and less pressure on land
 Technology transfer, education and administrative skills
Weber’s Least Cost Theory of Industrial Loca-
tion
• Alfred Weber (1868-1958) , a German economist, and locational the-
orist, devised a model to try to identify the most favorable location
where costs could be minimized.
• The most important costs were transport and labour cost.
Assumptions
• An isolated state
• Isotropic plain
• One finished product at a time transported to a single market location.
• raw materials evenly distributed across the plain.
• Labour was found in several fixed locations on the isotropic plain (it
lacks mobility) in unlimited quantities at the selected production site.
• Transport costs expressed in tones per kilometer were a direct func-
tion of the weight of the item and the distance transported.
• Perfect competition over the plain.
 One Market and one Source of Raw Material
• If the material is ubiquitous, processing occurs at the market.
• If the material is pure localized and if it gains weight on manufacture then the
least cost location will be at the market.
• If the material is pure localized, processing may occur at the market, the material
site or any place in between.
• If the material is weight losing, processing occurs at the material source
One Market and Two Raw Materials Sources
• If there are two ubiquitous raw materials, least cost location is at market.
• if there is one ubiquitous and one pure and localized material, the least cost loca-
tion is at the market.
• If there are two raw material sources both localized and pure, the least cost loca-
tion will be at or closer to the market.
• If there are two localized raw materials, one pure and the other gross, the indus-
try will locate at an intermediate point. The greater the loss of weight during pro-
cessing, the nearer the least cost location will be to the source of the gross mate-
rial.
• If there are two raw materials both localized and gross the least cost location will
be at an intermediate location closer to them than the market.
Critique of Weber
 It doesn’t consider government interventions, improvements in
transport costs, and technological advances in the processing of
raw materials, perfect competition is unreal.
 His treatment of transport didn’t recognize that these costs are not
proportional to distance and weight and that intermediate loca-
tions necessitate additional terminal charges. Improvements in
transportation and communication technologies reduce costs
 Labour is mobile through migration and is not available in unlim-
ited quantity at any location
 Many plants obtain large number of material inputs and produce
wide range of products for diverse markets
 Weber underestimated the effect of agglomeration
 The urban Hierarchy
Central Place Theory
• A central place is a settlement that provides goods and services for
the people who reside there and the area around.
• Central place theory is concerned with the functional interdepen-
dence of settlements within a hierarchy. The smaller settlements de-
pend on larger settlements for higher order and specialist services.
• It was developed by Walter Christaller which explains the size, spac-
ing and functions of urban settlements
• With regard to the spacing, size and functions of settlements
the following generalizations may be made:
 the larger the size of settlements, the fewer they are in number.
 The larger the size of settlements, the greater the distance be-
tween them.
 The larger the size of settlements, the greater the range and
number of its functions.
 The larger the size of settlements, the large the trade area
served by the central place
 As a settlement increases in size, the number of higher-order
services will also increase. Specialization in services increases
with an increase in settlement size.
Range and threshold of central place functions
• The range of a good or service is the maximum distance over which
either a customer would be prepared to travel to obtain it or a supplier
travels to provide it. The sphere of influence (range) is dependent up
on the value of the good or service and the frequency that it is de-
manded.
• Low order items such as newspaper, sweets, drinks, clinics, primary
schools required frequently by most people are found nearly in all
central places and therefore have a smaller range while high order
goods/services cost more and are not required frequently such as fur-
niture, electronics, hospitals, universities whereby people will be pre-
pared to travel a longer distance for them.
• The catchment area for a higher order good/service must be suffi-
ciently large; higher order functions are widely spaced.
• The demand threshold of a good or service is the minimum number of
people required to support any good or service outlet established at a
central place. Minimum number of purchasers is necessary before it is
worthwhile setting up a supply outlet and for the firm to stay in busi-
ness.
Underlying assumptions:
• Isotropic surface and evenly distributed small-nucleated hamlets.
• Transport was equally easy and cheap in all directions away from the
center.
• Transport costs were proportional to distance from the central place
and there was only one form of transport; equal ease of transporting in
all directions.
• Population and resources were evenly distributed across the isotropic plain
• A steady state economy free of government control or social class
• Goods and services were always obtained from the nearest central
place so as to minimize distance traveled
• All customers had the same purchasing power (income) and made
similar demands for goods and service.
• Central places that offered only low order goods had small sphere of
influence while those offering higher order goods for which people
would travel further had larger sphere of influence. The higher order
central places provided both higher- order and lower-order goods and
services.
 Determining K-Values, and Central Place hierarchy

• Hierarchy of central places can be established by classifying each cen-

tral place according to the highest order good or service it supplies.
• The ideal shape for the sphere of influence of a central place is circu-
lar as all points on the boundary are of equal distances form the cen-
ter, however, there will be non-served gaps/ overlaps. To avoid this,
touching hexagons are used.
• By arranging the hexagons, Christaller produced three different pat-
terns of service or trading areas. He labeled them K= 3, K= 4 and K=
7 where K is the number of places dependent up on the next highest
order central place.
• K= 3(marketing principle) implies that the trade area of
the third order (largest) central place is three times the area
of the second-order central place which in turn is three
times larger than the trade area of the first-order (lowest )
central place. For example, there will be one large city, three
regional centers, nine –large towns etc.
• If a settlement is located between two or more central
places, markets would draw a proportion of the trade from
up to six surrounding centers and the other market villages
would also share this trade. Each central market village re-
ceives the trade generated by up to three times its own popu-
lation. The surrounding villages each contribute one-third of
the population. (6X 1/3 = 2) plus all of its customers (1)
thereby serving the equivalent of three central places (2+1).
 I
C
J H
B
Christaller’s k =3
D A G
Population of D shared to A,J,K
K E F M
L
• K=4 implies that the trade area of the third order central place is four
times the area of the second order central place which in turn is four
times larger than the trade area of the first order central place.
• In the K=4 arrangements, the first order settlements are located at the
mid points of the sides of the hexagon instead of at the apexes as in
the K=3 arrangement. Customers from the first order settlements have
a choice of only two markets up on which they are assumed to be
shared. The third-order settlement (A) will therefore take half of the
customers from each of the six first order settlements (6 x ½ = 3) and
all of its own customers (1) to serve the equivalent of four central
places (3+1). This pattern is based on a traffic principle whereby
transportation (travel) between two centers is made easier and
cheaper.
 Christaller’s k = 4

I
J
B H
G C
A
F D
K M
E
L

Population of “F” is shared between A and K

• In the k=7 arrangement all the lower order central places lie within
the hexagon or trade area of the higher-order central place so that all
of the customers from the six smaller settlements plus all of the inhab-
itants will go to the highest order.
• The higher-order settlement serves the equivalent of seven central
places (6+1). This arrangement is called the defensive or administra-
tive principle as this system makes it efficient to organize or control
several places and the loyalties of the inhabitants of the lower order
settlements to a higher one are not divided.
• Efficient administration demands a clear separation of all com-
plementary regions for they cannot be shared administratively
 Christaller’s k =7

I

H

J
 C B

K


D
E  A G
F 
M
  

L


All villagers go to A
 Limitation of Central Place Theory
• Large areas of flat land are rare and relief barriers and river valleys
channel transport in certain directions. There is more than one
form of transport and costs are not proportional to distance
• People and wealth are not evenly distributed. Provision of services
may be concentrated in fewer and larger units to obtain benefits of
economies of scale
• Government intervention through planning measures has interfered
in the operation of the market forces, which shape the central place
system.
 The Rank-Size Hierarchy
• The rank-size rule developed by George Zipf in 1949
devised explained the size of cities in a country.
• It enables us predict the population size of any given ur-
ban center given the center’s rank and the population
size of the largest urban center
• The model outlined that the second largest city is half the
population of the largest city; the third largest city is one-
third of the largest city…..
The law of primate city
•Developed by the geographer M. Jefferson to explain the
phenomena of huge cities in terms of population and eco-
nomic activity
•could be an exception to the rank size rule in that a coun-
try's leading city is always disproportionately large and ex-
ceptionally expressive of national capacity and feeling.
•A huge city that accommodates a large proportion of a
country's population as well as its economic activity, educa-
tional and cultural dominance, and political control
•Often the capital city and political center
•Tend to be national focal point, culture
 Assignments
1. Housing supply and demand in city_____
2. Informal and squatter settlements in…….
3. Challenges of urban growth and regional inequality,
4. Industrial parks development in Ethiopia: challenges and Opportuni-
ties;
5. Rural-urban linkages and regional development
6. Causes and consequences of urban expansion;
7. The urban informal sector: contributions and challenges
8. Urban land rent, housing prices, and neighborhood choice.
9. Urban Agriculture: Practices, Challenges and Opportunities
10. Urban unemployment in…..
11. Challenges of Urban Infrastructure and Service Delivery: case
12. Micro and Small Enterprises: Roles and Challenges
13. Satellite town development & integration with metropolitan areas
14. Trade activities in urban areas
15. The urban development policy of Ethiopia
16. Growth pole Theory and regional Development
17. Urban Regeneration
18. Urban agglomeration
19. Urban recreational parks development
End