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Manufacturing & Industrial Location Theory – Chapter 10

Manufacturing & Industrial Location Theory – Chapter 10. Questions 5 lectures left! Location Theory Weberian location theory. Alfred Weber, 1909 One market, two localized Gross RMs. Let’s assume two localized Gross RM sources, S 1 & S 2 Gross RMs, 50% weight loss for each

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Manufacturing & Industrial Location Theory – Chapter 10

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  1. Manufacturing & Industrial Location Theory – Chapter 10 • Questions • 5 lectures left! • Location Theory • Weberian location theory

  2. Alfred Weber, 1909One market, two localized Gross RMs • Let’s assume two localized Gross RM sources, S1 & S2 • Gross RMs, 50% weight loss for each • S1, S2, or M = • $4

  3. Alfred Weber, 1909One market, two localized Gross RMs • Least cost location is likely to be some intermediate point • Location is ‘pulled’ towards site of greatest weight loss • Varignon frame

  4. Varignon Frame Source: P. Dicken and P.E. Lloyd Location in Space 3rd edition 1990 Harper&Row

  5. Alfred Weber, 1909Labour costs: Isotims • Labour costs as “distortion” to basic transport costs pattern • Isotim • Line of equal transport cost for any material, RM or FP • “X” has cost of $3.

  6. Alfred Weber, 1909Labour costs - Isodapanes • Isodapane • Line of total transport costs • Determined by summing the value of all isotims at a point • And joining all points of equal total transport costs

  7. Alfred Weber, 1909Labour costs – Critical Isodapane • Lower labour cost locations OR • Cheaper locations due to agglomeration economies • Total cost saving of $n per unit • Do these locations lie within Critical Isodapane? i.e. $n isodapane • If yes, move! • (Assume no spatial inertia)

  8. Alfred Weber, 1909 Overlapping critical isodapanes • Agglomeration economies

  9. What is wrong with Weberian industrial location theory? • Single point markets • Geographic variation in demand • Over emphasis on transport • Terminal costs ignored • Labour is mobile yet localized • Vast number of component inputs for most manufacturing • Single plant independent firms is unrealistic

  10. Isard’s Substitution Principle • P. 220 • Skip it!

  11. Slopes could be very gradual Noneconomic factors may prompt nonoptimum location within margins Firms may not have data to determine the optimum Spatial Margins to Profitability

  12. Manufacturing: Regional Patternsand Issues • Manufacturing in Canada • Tariff • Import substitution • Protect infant industries • Foster industrialization and create industrial jobs • Linkages with other Canadian manufacturers • 3rd Plank of the National Policy of 1869

  13. Implications of the Tariff for Canadian Manufacturing • Industrialization benefits for southern Ontario and Quebec, rapid urban –industrial growth • Deindustrialization of Maritimes 1870s and 1880s • Higher costs due to tariff and low Canadian productivity were a small price to pay for Ontario & Quebec • The seeds of • Western alienation • Sir John A. & • Conservatives!

  14. Implications of the Tariff for Canadian Manufacturing • Foreign ownership • Tariff factories • Branch plant economy • Technological dependency • High costs, low productivity • Not competitive on world markets • No mandate to export • Main links to U.S. not Canada! • By 1980s, NTBs more significant

  15. Free Trade • CUSFTA – 1 Jan 1989 • NAFTA – 1 Jan 1994 • Foreign location no longer a condition of entry • Rationalization/specialization • Canada maintains positive balance of trade • Increases dependency: imports and exports • Weak C$ has been key to success • Dispute resolution mechanism

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