Theories of Regional Development

Walter Christaller‟s Central

Place Theory

2

Introduction

• Settlements – by-products of social &

economic interaction processes and can be

manipulated for desired changes in spatial

structure

• Human activities must cluster together for

internal and external economies of scale

• Clustering – social costs, diseconomies of

scale, spatial imbalances

• Autonomous processes that generate

clustering – directed through policy

interventions to generate growth foci3

Walter Christaller –

1893- 1969

German Philosopher &

Geographer

Published “ Central Places

in South Germany” in

1933

Foundation for a large

body of research on cities

as a system of cities ,

rather than as simple

entities4

Central Place Theory

This is theory concerned with the

functional importance of places

Functional Interdependence between a

town and surrounding area

Assumptions• Boundless and homogeneous plain

• Plain – Uniformly settled

• Farmers having same demand for goods

and services

• Business persons in urban areas &

Farmers as consumers – rational

individuals

• Free entry to market

• All equally well served by Central Places

6

Central Place

• -is a settlement that provides goods &

services. It can be small (a village) or

large (primate city)

• all settlements form a link in a hierarchy

7

Nature of Central places

Centralisation as a principle of order

“The Centralisation ( Crystallisation) of mass around a

nucleus is an elementary form of order”.

Centralistic principles are found in human settlements

Centrality – Measure of importance of a settlement

The best term for settlements are Central Places as the word

Central is neutral

Importance & Centrality – not synonymous - but there is a

strong correlation

8

Why are there very few

large settlements?

9

Settlement hierarchy

• Why are there very few large settlements?

• Large settlements need a very large population

(threshold) to support all of their functions

(services)

• Large settlements provide very high order

functions .Because these functions are so highly

specialised there is not enough demand to

support more than a few of them

10

Sphere of influence

• Is the area around each settlement that

comes under it‟s economic, social &

political control.

11

Sphere of influence

• The extent of the sphere of influence will

depend upon the spacing, size & functions

of the surrounding central places

12

Central place functions

• These are the goods & services it provides

for local customers & for clients drawn

from it‟s wider sphere of influence

Function= a service

Population size does not necessarily determine the importance

of the central place

13

DistanceQ

D

em

an

ded

Demand

Distance

FLIP

Dis

tan

ce

Q Demanded

Demand

Rea

l P

rice

pe

r U

nit

Market

Threshold

Range

Threshold

Range

Market location

Spatial Demand Cone

RANGE:

The spatial extent of

demand before demand

drops to zero

Increasing real

price

14

Distance

Q D

em

anded

Demand

Distance

FLIP

Dis

tance

Q Demanded

Demand

Real P

rice

per

Unit

Market

Threshold

Range

Threshold

Range

Demand = zero

15

Important definitions• Threshold:

– minimum DEMAND (volume of sales) needed for a business to stay in operation (and make a “normal” profit).

• Range:– maximum distance over which a good can be sold

from point P (i.e. where real price is low enough that people will travel to market to buy it)

• Profit = R – T – really an excess profit

• Threshold and range is the spatial basis for profit

16

Range & Threshold

• The range of a good or services is the maximum distance that people are prepared to travel in order to obtain it. (short distances for a low order item e.g. newspaper)

• The threshold of a good or services is the minimum number of people required to support it i.e. 2500- doctors surgery

• 500-primary school/ 25,000-shoe shop /60,000 for a large supermarket/

• 100,000- large department store/ 1million University

• The more specialised the service the greater the number of people needed to make it profitable.

17

Range & Threshold

• Low order items (basic items)= newspaper

• High order items (specialised items)= furniture

• Low order functions (basic services)= corner shop/ Primary school

• High order functions (specialised services)= university/ hospital

• Settlements providing low order services = low order settlements (rural)

• Settlements providing high order services= high order settlements (urban)

18

Implications of the RANGE

R

T

M

Isotropic surface

Area of Extra Profit Min area required to stay

in business (normal profits)

?Unmet demand for same

good or service

19

Implication of RANGE:

• room for more than one producer of

same good / service

– where would producer locate?

– > 2*R

– avoiding overlap

20

Implications of the RANGE

R

T

M

Homogeneous plain

?Unmet demand for same

good or service

R

T

M

2R distance

21

?Unmet demand for same

good or service

22

R

T

M

How can problem of interstitial areas of unmet

demand be solved?

23

R

T

MR

T

MR

T

MR

T

M

R

T

MR

T

MR

T

MR

M

R

T

M

R

T

MR

T

MR

T

MR

T

M

R

R

T

M

Interstitial areas of unmet demand disappear if

markets are moved closer together

24

R

T

MR

T

MR

T

MR

T

M

R

T

MR

T

MR

T

MR

M

R

T

M

R

T

MR

T

MR

T

MR

T

M

R

R

T

M

How will market area boundaries form given the

ellipses formed by overlapping market areas?

Overlapping Trade

Areas

•Unfilled demand

now served

•Competition

25

A system of hexagonal market areas fills the plain so that

every consumer is served and no market areas overlap

No Overlapping

Trade Areas

•Unfilled demand

now served

•No competition

•Every producer

making “normal

profit”

Homogeneous plain

26

Further economic / spatial

complications:

• T and R are good- or service-specific

• Separate demand curves / cones for

each good or service

• Why?

– Different levels of demand

– Different sensitivity to distance etc.

27

Distance

Q Demanded

Distance

Good / service A

Good / service B

Good / service C

28

Distance

Q Demanded

Distance

Good / service A

Good / service B

Good / service C

Range A

Range B

Range C

29

Distance

Q Demanded

Distance

Good / service A

Good / service B

Good / service C

Range A

Range B

Range C

30

31

32

Central Place Hierarchy: Cities,Towns,

Villages and Hamlets:

• Why cluster in Central Places?– Agglomeration economies

• Urbanization economies

• Localization economies

• Clustering in Central Places– Vertical arrangement of central Places

• (relative importance)

– Horizontal Arrangement of Central Places

• (situation of central places)

• Organization of central place hierarchy– Ordering principles: k=3, 4 and 7

– Relationship between centres and market areas

33

Changes in population size & number of

functions

• Settlement sizes change over time (via births, deaths, migration)

• Settlement functions (services) change over time

• Over the past 50yrs in the India= decrease in the no. of services available in small settlements and an increase in the no. of services provided by larger settlements

Settlement size- increases

Num

ber

of fu

nctions

1940

1998

34

Factors that affect a settlement’s

number of functions

• Settlement depopulation or increased population

• Greater wealth & mobility means some rural populations no longer visit their own local services but go further afield seeking services from higher order settlements

• Domestic changes means rural households no longer make use of daily low order services (village shop)

Population size does not necessarily determine the

importance of the central place but there is a strong

correlation 35

The rules of functional hierarchies

• 1. The larger the settlements are in size, the

fewer in number they will be

• 2. The larger the settlements grow in size the

greater the distance between them

• 3. As a settlement increases in size the range

and number of it‟s functions will increase

• 4. As a settlement increases in size, the number

of higher-order services will also increase (the

services become more specialised)

(service)

36

Walter Christaller‟s model of central

places

• The theory states that threshold and range act as laws that govern the number, size and distribution of settlements

• When these 2 factors act together they create a hierarchical landscape

• Christaller noticed in the flat land of South Germany that towns of a certain size were roughly equidistant (uniformly spread)

• He stated that the ideal shape for each towns sphere of influence should be a hexagon because circles either leave gaps (which are unserved by any central place) or they overlap (meaning one area is served by too many central places)

37

Christaller's central place theory

• Christaller stated that the best shape for a sphere of influence is a hexagon. This shape means that consumers still have accessibility to the highest order central place and its trading area from all parts of the hexagon.

• Christaller's key idea was that customers would go to the nearest higher order central place to buy goods and services

• High order central places act like a magnet for consumers.

• He called this phenomenon K=3 (or the marketing principle)

• In order to make his theory work Christaller had to make a few assumptions

• He assumed that each trading area had an isotropic surface (that the whole area was the same all over) i.e.

• the whole area was flat

• there was only 1 form of transport (and transport costs were proportional to distance)

• the population was distributed evenly across the plain

38

What's wrong with circles?

What‟s wrong with circles

39

The areas within the

black dots shows the

sphere of influence

(trading area) of the

largest settlements

Like London

40

Example -the highlighted lower order settlement

(village X) will have 1/3 of is consumers go to

the city (settlement A) and 1/3 will go to town Y

and 1/3 will go to town Z (middle order

settlements)

All the other lower order settlements (red dots)

will follow the same pattern.

Settlement X

The high order (3rd

order) settlement (A) in

the middle is

surrounded by medium

order settlements

(black dots) and lower

order settlements

(small red dots). These

consumers are

attracted in equal

amounts to whichever

large central place is

nearby.

K=3 The marketing principle

Y

Z

Why is K=3 called K=3?

Hint look at the numbers of consumers

who visit the highest order settlement 41

K4= The Traffic Principle

In the K=4 model

the lower order

settlements (red

dots) only have a

choice of 2 higher

order settlements

to visit, in order to

buy goods and

services.

-Half of them go to

settlement A and

the other half go to

a medium order

settlement (black

dot)

How did K=4 get its name?

Why is K=4 called the Traffic

Principle (model) 42

How the K=4 Traffic principle got it‟s nameThe K=4 model is

called the traffic

principle because the

model shows how

consumers are

influenced in where

they go to shop for

goods and services by

transport routes

The Crossways

train-line

In this example the low

order settlements (red dots)

are located along a transport

route. This means that

these low order villages can

only visit other settlements

that are also on their

transport route. So they are

limited to visiting the

settlement behind them on

the transport route or the

settlement in front of them. 43

Why is K7 called K7?

U

V

X

Y

W

Z

A high order

central place is

shown.

-All the low order

settlements lie

within the

hexagonal trade

area (U,V,W,X,Y)

This model shows a hierarchy of

control -Lower level settlements are

arranged within the sphere of

influence of the highest order

settlement. This is done so that the

lower order settlements can be

completely controlled by higher levels.

K=7 The Administrative

Principle

44

45

The marketing principle (k=3). The territory is served by a minimum number of

urban centers. Each centre has the largest choice (3) to purchase goods and

services of an higher order.

The transport principle (k=4). In this distribution, as many centers as possible are

along main transport lines. The system tends to be linear in orientation. With the

transportation principle, towns not on major transportation routes are smaller than

expected because on the market principle. Transportation routes attract business

and allow more and large towns to develop along the railroad.

The administrative principle (k=7). The central place system is organized in such

a way that there is a clear separation or all market areas. In the k=3 and k=4

principles the border between market areas of a centre of higher order is composed

of lines between centers of lower order. Administratively, it does not make sense, so

according to this principle, the boundary is located halfway between two centers of

the same order. Political boundaries also "distort" the even pattern of cities.

Causes of Dynamism

• Competition among forces of marketing,

transportation and administration

• Arrangement of general factors of

production including density, distribution

and structure of population, type, price and

production cost of central goods,

transportation technology

• Influence of internal and external forces

such as long distance trade, industrial

development and local events46

Uses of Christaller’s Central Place Model

• Breakthrough in predicting & understanding

hierarchical development of settlements

• Applied in regional and urban economies in

describing location of trade and service activity

and consumer market- oriented manufacturing

• Distinctive social network as economic activities

and movement of people are modified

• Foundation for a large body of work on „Systems

of Cities‟

47

Uses of Christaller’s Central Place Model

• The model is often used by governments to plan the location of new towns (i.e. Milton Keynes) and high order services i.e. hospitals

• It is used by transport authorities to plan transport routes( so that all areas have equal access i.e. K4 model)

• Businesses can use the model to decide where to locate a new shop

48

Limitations of Christaller's model

• Few real-life regions fit Christaller's model (except the flat lands of the Dutch Polders and East Anglia in the UK)

• The problem lies in the basic assumptions of the model:

• People do not always go to the nearest central place (they may chose a new edge of city superstore further away) So the K3 theory wouldn‟t work.

• Large areas of flat land rarely exist. Mountains & hills etc distort transport routes (so the K4 theory wouldn‟t work)

• People and wealth are not evenly distributed (if poorer people live in a certain area & their nearest high order settlement is expensive then they won‟t visit it)

• Governments often control where new towns are located, not market forces (i.e. not necessarily where the demand for goods and services is highest)

Hill

Train-line49

Laundhart’s Theory

• Laundhart in 1882- Individual

manufacturing firms locational decisions

based on transportation costs

• Relative to location of raw materials and

consumer markets

• Optimum location of firms

• Foreshadow of Industrial Location Theory

of Weber

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Alfred Weber & Industrial Location

Theory

• Minimum transport theory – 1909 –

Locational preference of individual firm

• Expanded Laundhart‟s approach by

introducing variables such as labour cost,

agglomerating factors and deglomerating

factors

• Assumed static location of raw materials,

output consumption, immobility and unlimited

supply of labour at fixed wages and

transportability of raw materials51

Assumptions

• Isotropic plain assumption- model is operative in a

single country with a uniform topography, climate,

technology, economic system.

• Only one finished product is considered at a time,

and the product is shipped to a single market.

• Raw materials are fixed at certain locations, and the

market is also a known fixed location.

• Labour is fixed geographically but is available in

unlimited quantities at any production site selected.

• Transport costs are a direct function of weight of the

item and the distance shipped.

52

• Tries to explain & predict the locational

pattern of the industry at a macro-scale.

• It emphasizes that firms seek a site of

minimum transport and labour cost

• Deals with weight of goods and distance –

postulated only one form of transportation

• Locational figure – area bounded by places of

consumption and sources of raw materials

53

• The reasons for location of certain types of

industry

Function of transport cost where it does

not use weight losing materials

Drawn to sources of raw materials where

it does not use weight losing raw

materials

Concentration of industries which have a

high labour cost per weight

• Supply side model – assumes static demand

in a single market or to a single distribution

point to multiple markets54

• Locational patterns of industrial firms

based on three principles:

Minimum transport cost

Labour Isodapanes

Effects of Agglomeration

55

Material Index• The point of optimal transportation based on the costs

of distance to the "material index" - the ratio of weight

of intermediate products (raw materials) to finished

product.

• If the weight of the final product is less than the

weight of the raw material going into making the

product -- the weight losing industry.

Example - Copper industry, it would be very expensive

to haul raw materials to the market for processing, so

manufacturing occurs near the raw materials.

• If the final product is heavier than the raw materials

that require transport. -weight-gaining industry.

56

• Weight losing raw materials lose weight

during production process and increase

the locational pull of source of raw material

in determining minimum transport cost

• Pure raw materials closest to place of

consumption tend to be used since total

transport cost would be lowest for users

57

• As pure raw materials would tend to be

exhausted over time, Weber suggested

that over the long term for industries for

which raw materials have weight losing

characteristics, location near the source of

raw material becomes an even stronger

pull

• Reinforced by process and technological

improvements

58

Labour

• Labour distortion:

Sources of lower cost labour may justify greater

transport distances and become the primary determinant

in production.

• Unskilled Labour –industries such as the garment

industry require cheap unskilled laborers to complete

activities that are not mechanized. They are often termed

"ubiquitous" meaning they can be found everywhere.

• Skilled Labour - High tech firms- require exceptionally

skilled professionals. Skilled labour is often difficult to

find.

59

• Isodapanes- Circles around points of minimum

transport costs - within which additional transport

costs are equal

• Isotim-a line of equal transport cost for any

product or material

• Critical Isodapanes – Savings in labour cost is at

least equal to increased transport cost at the

new location outside of the point of minimum

transport cost

• Locational figure was derived

60

• Low population density increases average

distance between locational figures and

labour

• Rate of transportation cost increase with

distance determines size of isodapanes

• When transport costs are uniformly low

and rate of increase of transport cost is

low with distance , labour exerts stronger

pull on optimum firm location

61

Agglomeration and Deglomeration

• Agglomeration - phenomenon of spatial

clustering, or a concentration of firms in a

relatively small area.

• The clustering and linkages allow individual

firms to enjoy both internal and external

economies.

• Auxiliary industries, specialized machines or

services used only occasionally by larger firms

tend to be located in agglomeration areas, not

just to lower costs but to serve the bigger

populations.

62

• Deglomeration occurs when companies and

services leave because of the diseconomies of

industries‟ excessive concentration.

• Firms who can achieve economies by increasing

their scale of industrial activities benefit from

agglomeration.

• However, after reaching an optimal size, local

facilities may become over-taxed, lead to an offset

of initial advantages and increase in Production

Cost

• Then the force of agglomeration may eventually be

replaced by other forces which promote

deglomeration.

63

• Locational triangle. - one market and two sources

of material.

• This illustrated such that manufacturing which

utilizes pure materials will never tie the

processing location to the material site.

• Also industries utilizing high weight loss materials

will tend to be pulled toward the material source

as opposed to the market.

64

• Furthermore many industries will select an

intermediate location between market and

material.

• The last generalization is considered to be

wrong because he never takes into

account terminal costs and therefore is

considered biased toward intermediate

locations.

65

• Increase in land rent caused by

concentration of firms (agglomeration)

causes an opposite effect as land rent

rises (deglomeration)

• Cost savings in concentration can

counterbalance increased land rent

• Critical Isodapanes regarding

concentration exists where rise in

transportation cost is balanced by lower

cost due to concentration

66

• Least cost location then implies marketing the product at

the least cost to the consumer, much like retailers

attempt to obtain large market shares today.

• Economically, it is explained as one way to make a

profit; creating the cheapest product for the consumer

market leads to greater volume of sales and hence,

greater profits.

• Therefore, companies that do not take the time to locate

the cheapest inputs or the largest markets would not

succeed, since their product costs more and costs the

consumer more.

67

• Didn‟t explain Central Places

• Critical assumptions

Unlimited availability of labour

Site Rent

Varying prices and demand

Varying factor proportions in production

68

Criticism• Geographic variation in market demand, which

is considered a locational factor of paramount

influence – not considered

• Treatment of transport did not recognize that

these costs are not proportional to distance and

weight, and that intermediate locations

necessitate added terminal charges.

• Labor is not always available in unlimited

quantity at any location and is usually quite

mobile through migration.

69

Criticism

• Most manufacturing plants obtain a large

number of material inputs and produce a

wide range of products for many diverse

markets, so his theory doesn‟t easily

apply.

• Underestimated the effect of

agglomeration

70

Löschian Theory

• The German economist August Lösch

expanded on Christaller‟s work in his book

“The Spatial Organization of the Economy”

(1940)

• Used a concept similar to Range and

Threshold

• Contended that K=3 was a simple case of

a general arrangement

71

• Considered other values for K

• More flexible system in which different

goods and service have different

thresholds and different market areas

• Centres of differential functional mixes

• Superimposition of different market areas72

•Individual market area networks –

superimposed in such a way that there is at

least one common central location

•Rotation of networks – location pattern in

which certain sectors are with many urban

places and others with few

73

74

75

Growth Pole Hypothesis

• Formulated by Perroux – 1955

• Urban Centres – foci of change

– Developing countries – Over grown villages

– Developed countries – Generators of social

and economic change

76

Assumptions

• Human activities must cluster together to

generate internal and external economies of

scale

• Clustering also entails social costs,

diseconomies of scale & spatial imbalances

in social and economic development

• Autonomous processes that generate

clustering can be directed through policy

interventions to generate growth foci in areas

where they do not exist

77

Concept of a Growth Pole

• Growth pole – concentration of highly

innovative and technically advanced

industries that simulate economic

development in businesses and industries

78

Concept of a Growth Pole

• Centre in abstract economic space from

which centrifugal forces emanate and to

which centripetal forces are attracted to.

• Forces – economic in nature

• Generators – firms & industries

• Process of economic growth – unbalanced

involving a succession of dynamic poles

through time

79

• Large economic units that are innovative –

dynamic propulsive firms

• Dynamic firms – new, technologically advanced,

operating in high income elastic markets market

for its products

• Exert influence on economy through inter-

industry linkages

• Linkages – forward or backward

• Backward linkage – growth in production in one

industry stimulates the production in the

industries supplying it

80

• Forward linkage – when the availability of the

output of an industry make possible the

production of industries using that output

• Clusters become growth poles if leading &

propulsive industries come together to form a

complex, large enough to exert a determining

influence over industrial environment

81

Dominant Propulsive Firms

• Relatively large

• Generate growth impulses to its

environment

• High ability to innovate

• Belongs to fast growing sector

• Technologically advanced

82

• Relied on Leontief Model – Once

inter- industry linkages are well

established, developmental activities will

spread automatically

83

Criticisms

– Static character of inter-industry model –

while developmental processes are dynamic

in nature

– Less concerned with spatial dimensions

– Failure of newly established industrial

complexes with inter- industry linkages to

generate development in surrounding

environment

84

Growth• Expansion in quantitative terms and structural

changes in society and economy

• Elements of change – institutional, social and

economic ( sectoral and spatial)

• Development – change in desired direction at

a desired speed

• Presupposes policy interventions to attain

goals and objectives

• Involves socio- psychological transformation

• Involves temporal, sectoral and spatial

phasing & integration of planning85

THANK YOU

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