Price Equiibrium Based Approaches to Regional Economic Development
Where the factors or componants of production are fairly mobile (they can shift around the countryside easily) a local economic development effort can use this reality effectively. What generally happens is that owners of firms will tend to shift locations in order to minimize costs over the long term. Obviously they are not going to move every day, but over time, these moves tend to take place.There are some aspects of this to watch for , inorder to be alert to new opertunities, and to thinkabout how to attract new industries to the region:
- cumulative Causation This is the snowball effect, and it works both ways. When it is gaining momentum, more and more businesses tent to agglomerate together to save each otehr money. This is what regions want to start moving. When it loses momentum, often a region starts losing more and more businesses as they "flee lik rats off a siking ship". This is an effect a region needs to be alert for. If it is happening to them, they need to stopthe hemmorage. if it is happening somewhere else,then maybe they can attract some of those fleeing busineses to their area if they can provide what those firsm are seeking.
- Spread and backwash factors These work in relation to each other often. On the one hand investers tent to spread out into thehinterland looking for new invelsments. Maybe a region can make their region attractive enough to lure some of them. Backwash refers to the brain drain that happens in hinteerland areas. It is very hard to attract new business if all the talent leaves the area. If firms agglomerate elewhere, then local talent will tend to follow.
- Growth pole refers to the trickle down of businesses from a central city to more distant parts ofa region. This is often the case where there are spin-off busineses from a mojor one in a larger center. These secondary businesses may be farther out from the center for economic reasons. Alert regions may be able to encourage this sort of development.
- Automomous Growth Centersrefes to a consideration of a combination of cumualtive casuation and growth poles in such a way that the interdynamics of a gegion within itself or several regions are compared withe each other in terms of their long term dynamics. Each center ebbs ans flows in its level of economic vigour and as life cycles shift othe rcenters take up the lead. Alert Regions can capitalize on such dynamics as they seek to stop losses and attrat others frokm regions that are losing their predominance.
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