Abstract
The objective of this investigation is the extension of empirically validated knowledge of the determinants of the location of economic activity. Hopefully, the investigation yields information useful to policy makers concerned with such locations. The author believes that, in order to formulate effective policies with respect to the location of economic activities, the nature of locational decisions must be understood. The need for such understanding is detailed briefly in the following section of this Chapter. The theoretical understanding which forms the basis for this investigation is the classical or Weberian industrial location theory which is outlined below in this Chapter. This theory holds that locations for economic activities are determined primarily by certain factors of location, such as the location of markets, resources, labor supplies and other factors often called agglomerative economies.
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Notes
See Hoover [18] pp. 241-300 for the role of public policy in location.
The ‘1961 International Site Selection Handbook’ lists more than 11,000 organizations which are engaged in industrial development activities at local, area, state or national levels [20].
A recent commentary and bibliography on this point are provided in Braschler [5: 109-111].
See, for example, Perloff et al. [38: 677ff].
See Tiebout [49] for examples from surveys.
Location models which explicitly consider the dynamic and sequential nature of decision making are as yet highly abstract and require data unavailable at present. Dziewonski [12], for example, proposed utilizing a concept of socio-economic time-space.
Lichtenberg reported that in 1954, 13.9% of total manufacturing employment in the U.S. was in industries whose dominant locational factor was inertia [29:39]. Menchik observed that ‘Manufacturing plants and other workplaces are generally highly immobile … To [this reason] for the slow rate of spatial adjustment, we may add the familiar general causes of slow behavioral change — acquaintance with only the old practices, uncertainty about new behavior, and the money and psychic costs of change’ [35: 154].
See Takayama and Judge [48] for a mathematical statement of an optimum.
See ‘Master List of Location Factors’ [20] for an exhaustive listing.
Pred went further and stated, ‘there is no single touchstone capable of intelligibly and precisely explaining industrial concentration’ [39: 132].
Orientations suggested by other authors include Klaassen’s [25] demand and supply orientations, which are related to the market and material orientations used here, but include all output purchasers and input suppliers. The market and supply area analysis of the modern Weberian framework is similarly related to the orientations discussed in this study. The modern Weberian framework also expands Weber’s labor cost differentials including differentials on power, water, and other processing costs in addition to labor [21: 133]. Labor is the only one of these given explicit consideration in this study. The others become part of the generalized agglomerative economies discussed below.
This applies to wage rates within normal ranges in the short run. The ability of firms to attract low-cost labor to their sites, especially if the offered wage is significantly higher than that available at labor’s origin or if unemployment rates are high at the origin, is recognized.
Mishan stated that an ‘essential feature of an external effect is that the effect produced is not a deliberate creation but an unintended or incidental by-product of some otherwise legitimate activity’ [36: 2]. In the area of location theory this feature may be out of place because firms take purposeful action to take advantage of external economies that are only potential until they take action. Furthermore some of these potential external economies are consciously created by public or private agents.
As explained above, labor orientation is also produced by a geographically immobile economy.
In the preceding discussion of external economies no reference was made to a distinction between pecuniary and technological or real economies. With the exception of Bain, industrial location practitioners and theorists have not found the distinction necessary or useful [3: 57]. In addition it has been shown that any technological economy can be converted to a pecuniary one by appropriate pricing of inputs [58: 883].
The Standard Industrial Classification, SIC, system breaks all industries down into major industry groups which have a two-digit designation and subdivides each group into component major industries (three-digit designations) which are further subdivided into specific industries (four-digit designations). The system extends to the seven-digit level for some industries.
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© 1976 H. E. Stenfert Kroese B.V., Leiden
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Latham, W.R. (1976). Introduction. In: Locational behavior in manufacturing industries. Studies in applied regional science, vol 4. Springer, Boston, MA. https://doi.org/10.1007/978-1-4613-4369-1_1
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