Economic Geography Research Paper

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Economic geography is the study of the geography of economic activities. The field includes the study of where economic activities are located (their pattern or distribution), why they are found where they are (the processes by which they are located), and what their impact is on that place and other places. In addition, normative studies of optimal location (where activities should be located) also fall within economic geography.

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1. The Scope Of Economic Geography

Economic geography includes a wide range of topics that span production, consumption, and distribution activities. The subject matter of economic geography encompasses the traditional sectors of economic activity: the primary sector (agriculture, fishing, forestry, and mining), the secondary sector (manufacturing, including processing and assembly), and the tertiary sector, or services. Services, the most rapidly-growing part of most of the world’s economies, are often disaggregated into quaternary (information-related) and quinary (decision-making) services. The interrelationship of these sectors and changes in them affect employment and how one makes a living. In addition to the sectors of activity, economic geography has seen as a central objective to understand the uneven development of regions, one of the foremost impacts of the location of economic activities.

Most human impacts on the earth’s environment have been the result of economic activity of one type or another. These processes take place at various scales (local, regional, national, global) simultaneously. The interconnected nature of human economic activity is seen in the interaction between subsistence farming and the market, which provides nonfarm work and income as well as goods that may compete with traditional commodities.

The primary sector remains integral to the field. The range of forces that affect agriculture include the physical environment, economic behavior and demand, institutional, social and cultural influences; in turn, agriculture affects the natural environment (Grigg 1995). Among the more prominent forces that affect agriculture are technological change, which has permitted massive increases in productivity, and the increasingly global links from growers to consumers. Globalized agribusiness illustrates the central role of large, transnational firms in the organization of this (and other) economic activities (Goodman and Watts 1997, Le Heron 1993).

Dependence on the primary sector has numerous disadvantages. Oversupply has weakened countries that are producers of many mineral commodities. Deforestation is a common result of high levels of demand for scarce types of wood. Energy and other natural resources are typically addressed separately.

The secondary sector, manufacturing and processing industries, is the core of industrial geography, although the latter increasingly incorporates any or all of the sectors as firms have begun to operate across traditional sectoral boundaries. Although economic geography formerly was largely focused on production, it has grown to include the services, finance, information, technology, consumption, and state regulation (Martin 1994).

Services, the tertiary sector, comprise intangible activities ranging from personal services such as cutting hair to research and legal advice. Services have expanded enormously in recent years as higher incomes permit more people to travel and eat in restaurants and to use computer software.

A conventional textbook organization of economic geography begins with population and resources— population because people are both workers and consumers in the economy, and resources because what is available locally will determine to some degree what must come from elsewhere via trade. Distribution activities (especially transportation), agriculture, cities, the international economy and variations in economic development are standard topics.

2. A Brief Historical Look

Economic geography has perhaps the widest scope of all of the systematic areas of geography. It originated to a large degree from the identification of resources that had commercial or economic value. Extraction and manufacturing, comprising commercial geography, formed the principal focus of research by economic geographers in the first quarter of the twentieth century. The intervening decades saw a great deal of research related to transportation and cities, where most economic activity takes place, industry location and, increasingly after the Second World War, to retailing and (what would now be called) the geography of the service economy. Most research remained quite local, however, concentrating on specific areas and individual industries. As economic activity became less dependent on direct inputs from agriculture, mining and other primary activities, economic geographers found less relevance from their colleagues in physical geography.

Theoretical concerns in economic geography for many years centered on examining patterns linked to theories and models, such as central place theory and empirical verification (Berry et al. 1988). During this period, economic geographers were among those involved in the founding of regional science as an interdisciplinary field. Regional science also brought to economic geography an array of models for optimal location of industrial and service activities and of transportation and trade flows. Many of the foci of optimization modeling concern flows related to economic phenomena, such as journeys to work and shopping trips. It has been difficult to utilize equilibrium approaches to explain some flows, such as of traded goods. Theories of trade, for example, do not encompass adequately the growth in intrafirm and intraindustry trade or the effect of government decisions and policies.

3. The Concerns Of Economic Geography

It has been necessary to cross several disciplinary boundaries, not only that with economics. It is common for geographers to rely on research in planning, sociology, engineering, and other fields in order to understand better the processes that form the patterns found on the landscape. Within the core of economic geography, several topics helped to set the direction of the future: the world economy and the capitalist system, firms and linkages among them, regional development and planning, and work and employment.

3.1 Understanding The World Economy

Paradoxically, understanding the economic geography of places and regions within the world economy has become more significant with the process of globalization. Globalization has taken place simultaneously with the rise of the service industries and their concentration in world cities.

Regional development, the impact of change in the type and nature of economic activity, has been a significant focus of both theoretical and policy-related research since the 1970s, as massive spatial changes accompanied the end of the golden era of economic growth. Regional development attempts to capture the range of economic, political, and social influences on regional patterns of employment opportunity. The patterns and processes of change typically exhibit uneven development, which is central to the study of economic geography (Massey 1995). This includes economic restructuring, the term used for developed economies, development theory, referring to less developed countries, and economic transformation or transition, referring to the evolution from central planning to a market economy. As active policy initiatives fell in importance during the 1980s, research became more local in focus, highlighting the unique cultural and social circumstances of particular localities.

Research into the nature of capitalism attempts to understand how the capitalist system works through analytical approaches. A major conclusion of analytical research on capitalism is that the ‘golden path of accumulation’ in a capitalist system is unstable, and that a focus is needed on disequilibrium paths, centrally those surrounding technical change (Webber and Rigby 1996). The slowdown of accumulation, or fall in profitability, that began in 1973 and resulted in falling productivity can be attributed to technical change, which enhances the ability of firms, industries and regions to avoid the persistently falling rate of profit. While the disequilibrium view finds many adherents, most research in this area on technical change is limited to process innovations, and not to new products, which many would credit with the bulk of capitalism’s ability for Schumpeterian ‘creative destruction.’ The view of the economy as evolutionary and of firms as heterogeneous finds stimulus in several branches of economics outside the neoclassical mainstream, and especially on the topics of economic growth and technological change (Nelson 1998).

The political economy approach explicitly recognizes that ‘capitalism is not just a phenomenon of economic geography. It is also at one and the same time a social, cultural, and political geography’ (Peet and Thrift 1989). From this perspective and others, economic geography now incorporates social, cultural and political processes on a regular basis (Lee and Wills 1997).

The incorporation of cultural, social, political, and institutional influences within economic geography is fundamental to the topic of industrial districts and networks, which has highlighted the social embeddedness of these influences. On this phenomenon, identified throughout the world, processes beyond the purely economic are seen as critical (Lee and Wills 1997, Martin and Sunley 1998). These include institutions, culture, and social ties and conventions, all of which affect dramatically economic geography, whether production or consumption.

To understand the capitalist world economy requires understanding the role of money and finance. Financial flows have become not only international but continual as markets in London, New York, and Tokyo serve as continental financial markets. The nature of global money is just beginning to be understood.

Money, knowledge, and other phenomena move throughout the world economy via networks, whether physical or virtual. Attempting to understand telecommunications has been especially important as those technologies have become pervasive within and among firms as well as elsewhere in everyday life. The transforming systems of computers and telecommunications are outcomes of technological change taking place at a large (global or regional) scale as new infrastructures enable new forms of production, including many producer services.

Technological change is a source of resilience in the capitalist system, and repeatedly alters the nature of economic activity and its geography. This is the case particularly through the creation of new products, which broaden the range of possibilities for consumers and present substitutes for inputs. The topic of technological change also examines patterns of technological change, including the origins of new innovations, or places where technological goods and services are produced, whether called high-technology regions or technology districts.

3.2 Understanding Firms

Early studies focused on actual spatial patterns of industrial location, as well as optimal patterns, a theme that continues. The object in geographers’ study of firms is less the organizational or industrial form of these entities than their actual behavior. Understanding the mechanisms by which firms and industries operate and their impact on industrial location and regional development also is a central issue in Industrial Geography. Along these lines, of particular interest have been studies of vertical integration and disintegration, or what is inside a firm and what is obtained from other firms.

As companies became vertically integrated, absorbing necessary processes in-house, studies of large firms evolved into what was known as the ‘geography of enterprise.’ Globalization is an effect of the actions of large (multinational, transnational, global) companies, whether through trade, foreign direct investment, or other arrangements (Cox 1997, Dicken 1998). This work has been complemented if not largely superseded by the view that large firms are less influential in their own right than merely taking advantage of divisions of labor, an interpretation that goes a long way toward explaining the geography of production (Massey 1995, Sayer and Walker 1992).

In addition to large firms, entrepreneurship and small firms are a central feature of both flexible accumulation and creative destruction, and therefore have received increasing attention as their significance in most economies has grown. This is most evident in the case of regions where new firms and new industries are common.

3.3 Connections Among Firms

A surge of flexibility appeared to signal the vertical disintegration or ‘outsourcing’ of production as firms increasingly ‘bought’ rather than ‘made’ needed physical and service inputs. Flexible production became the dominant paradigm in economic geography, yet it is but one of several manifestations of a dramatic change or restructuring of economic activity (Barnes 1996, Martin 1994). The shift toward services and the interdependence of goods and services stand out in this regard.

Vertical integration had not vanished, however, but was transformed through complex relationships with suppliers and subcontractors. The global economy operates through complex webs of linkages, both vertical and horizontal, that form production chains that take different form in each industry (Dicken 1998). Large firms remain central to many industrial districts and other centers of flexibility because of their ability to control global networks. Despite their power, large firms have had to make painful adjustments and adaptations of flexible forms and processes. Adjustments to structural conditions are not simple, as sunk costs and uncertainty make even the largest firms unable to make optimal choices.

The study of the interdependence of firms takes two forms: aggregate input–output relations and more detailed firm-specific linkages. Input–output structures, while often based on surveys of firms, provide economy-wide, usually national, structures of interindustrial links, but also regional and interregional. Disaggregated studies of linkages, by contrast, focus on a single firm or a small number of firms, illuminating the geographical area within which a firm’s economic activities have influence. This may range from very local to global, depending on the firm and its sector, and only detailed study identifies which.

3.4 Economic Development And Restructuring

Economic development, long considered a nationallevel process, has been viewed widely to have brokendown to more regional and local processes. It is less frequently national states and more frequently regions where the dynamics of economic change take place (Scott 1998, Storper 1997).

Some of this work has looked at the restructuring as a transition from the capitalist ‘golden age’ to something different (Webber and Rigby 1996). Economic restructuring within capitalism is a result of the several distinct processes: sectoral change, especially from manufacturing to services (deindustrialization and tertiarization), flexibilization, the increasing feminization of the labor force, the new technologies of the information economy, hyper-consumerism, globalization, and deregulation and privatization (Martin 1994, Townsend 1997).

Fundamental to analysis of restructuring is the idea that interfirm competition is more intense and less stable than previously, with new rivals emerging from both other industries and from newly founded firms. New firm formation, or entrepreneurship, is particularly prominent in new industries, aided by the instability fostered by technological change. New firm formation is perhaps most a product of social class and of industrial history that create the culture and social norms in places (Massey 1995).

Spatial manifestations of restructuring—changes in firms’ locational decisions—are seen both inter-regionally as some regions rise and others decline, and intraregionally as some suburban nodes become cores of economic activity, especially of producer services. Innovative milieus represent an intriguing interplay between firms and territories, where those territories include not only other firms but also infrastructures, knowledge, and institutions and/organizations.

The optimal location of activities falls under the umbrella of location theory, and is closely related to the ‘new’ economic geography that has developed within the discipline of economics in recent years (see below). That research has developed models to determine optimal and/or equilibrium patterns of location. It should be noted that location theory is suited poorly to incorporate the realities of industrial location, especially the maximization of the quality of inputs rather than the minimization of transport and input costs.

3.5 Work And Workers

Uneven development and the spatial division of labor created are among the most fundamental constructs in economic geography. The spatial division of labor puts at the forefront the fact that not only different numbers of jobs (or varying amounts of economic opportunity) are found in different places, but also that different kinds of jobs are found in different locations. This view of spatialized social relations results in a geography not of the distribution of jobs but of power relations, of dominance and subordination, of enablement and influence (Massey 1995). Class, gender, and the division of labor are ‘intertwined structures’ that affect virtually all aspects of work and the geographies of the labor market (Hanson and Pratt 1995, Peck 1996, Sayer and Walker 1992).

The types of work made available in a place affect its potential for entrepreneurship and economic development. Some occupations are more amenable to new conditions and innovative activity, and a great deal appears to be cumulative. Existing theories, however, generally are unable to account for empirical patterns found.

3.6 The ‘New’ Economic Geography

A much more narrow definition of economic geography is that employed by economists practicing what is termed the ‘new’ economic geography (Krugman 1991, 1995, 1996, Ottaviano and Puga 1998). In this view, economic geography is ‘the location of production in space,’ the most striking feature of which is its agglomeration or concentration—‘clear evidence of some kind of increasing returns’ (Krugman 1991).

Models in this genre tend to focus on two regions (urban and rural or rich and poor) and two sectors, and aim toward or assume equilibrium or multiple equilibria, rather than the reality of disequilibrium. The highly restrictive models fail to approximate ‘real places’ or to incorporate spatial scale (Martin 1999). Echoes of this critique of mainstream economic growth theory lament the failure to include technological advance as an essentially disequilibrium process, a theory of the firm in which capabilities and differences across firms are central elements, and incorporation of a richer body of institutions (Nelson 1998). The difference between ‘formal theory’ and ‘appreciative theory’ is useful in the context of the debate on the new economic geography.

The ‘new economic geography’ models the centripetal forces that foster geographic concentration and agglomeration against the centrifugal forces such as immobile factors (including land, natural resources, and people) (Krugman 1998). Several ‘modeling tricks’ are used to arrive at an equilibrium solution, or multiple equilibria, to topics and situations studied by geographers several decades ago, such as central places and rank-size distributions (Berry et al. 1988). It is not surprising that ‘geography turns out to be perhaps the most naturally ‘nonlinear’ area of economics’ (Krugman 1998), but to geographers the critical point is the diversity of reasons why this so, not merely the mathematical approximation of it (Martin 1999).

Geographers are more inclined to focus on the empirical reality present in the world and the many geographies they represent (Lee and Wills 1997). Rather than linear, mechanistic metaphors, biological and evolutionary metaphors may capture more accurately the emergence of economic change. The broader conception draws not only from interdisciplinary links with other social sciences, but also from economics, where development in both institutional and evolutionary economics have meshed well with geographers’ broader view of the world. In general, economists prefer to assume equilibrium, whereas geographers’, restricted cognitive understanding of the world, and unequal locational advantage as the rule rather than the exception (Sheppard et al. 1998). The world is much more diverse than a single set of models can hope to capture (Martin 1999).

Spillovers and externalities (and interfirm linkages) are at the center of the debate. The presence of economies of scope and diverse locales turns the standard increasing returns model on its head, because it is based on an industrial organization that benefits more from intraindustry linkages than from scale of production. Likewise, knowledge spillovers across industries are ignored in the ‘new’ economic geography because they are not well understood or systematically measured and tracked (Krugman 1991), and they are seen as a consequence of market interactions involving economies of scale at the level of the individual firm (Krugman 1995). By contrast, untraded interdependencies, which are not able to be modeled, are central to much of the current thrust of research by geographers on learning in regions and localities (Pinch and Henry 1999, Storper 1997).

3.7 Clusters, Agglomeration, And Territorialized Learning

Among the most powerful processes for regional transformation and renewal is the process of regional learning. If organizations and regions can learn, it is because they are able to build and use relationships with other organizations in their environment. Lowtech as well as high-tech firms are able to draw upon spillovers of knowledge in this way (Maskell et al. 1998).

The presence of horizontal (interindustry) linkages and spillovers is expected especially within industrial districts and technology districts, now seen as special cases of clusters. Paradoxically, as globalization continues, regions—whether city-states such as Singapore, metropolitan areas, or cross-border territories—have become more significant as the loci of economic activity (Scott 1998, Storper 1997). Each region evolves a unique mix of products and technologies, skills and resources, conventions and customs, leading to a set of capabilities not found elsewhere. These geographically-specific capabilities—‘people’ in Krugman’s list of centrifugal forces—can serve as enduring competitive advantages of agglomeration (Maskell et al. 1998). They also create the variety that is evident in the economic geography of our world.

4. Conclusion

The breadth of economic geography makes it virtually certain that research focuses on one or more of the field’s topics. Economic geography has blossomed well beyond its original focus on the location of production to embrace the many other human forces—social, cultural, political, and institutional— that affect and are affected by economic activity.


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