Manufacturing & Industrial Location Theory – Chapter 10

Questions 5 lectures left! Location Theory

Weberian location theory

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

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

Varignon Frame

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

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.

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

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)

Alfred Weber, 1909 Overlapping critical isodapanes

Agglomeration economies

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

Isard’s Substitution Principle

P. 220 Skip it!

Spatial Margins to Profitability Slopes could be very

gradual Noneconomic factors

may prompt nonoptimum location within margins

Firms may not have data to determine the optimum

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

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!

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

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