THE REGION AND REGIONAL DEVELOPMENT

THEORIES
 CHAPTER III

THE REGION AND REGIONAL DEVELOPMENT THEORIES

3.1. The concept of Region

A region can be defined in various ways. The region is

sometimes a group of nations, sometimes a State, sometimes a

district, sometimes a block and sometimes a village even.

The ambiguity surrounding the term ‘region’ is so much that

there is no unique definition of the concept of ‘region’. A

clear cut and well defined spatial definition of the term

‘region’ is not possible in the face of a highly dynamic

integration process from top to bottom^. Perhaps no term in

the geogrpahical literature has received more attention

2
than region . It is fairly vague, for this word has

different meaning to different people or groups of people and

even to the same people or group in different circumstances.

It is difficult to define scientifically the concept of

3
‘region’ so long as we consider it as something of space and

for most geographers, region is linked with and defined in

terms of space.

3.1.1. There are thus numerous definitions of a region.

definitions can be

classified broadly* in two groups viz. (1) Subjective

definition and (2), Objective

•i
definition. The subjective

definition tries to identify the essence of a region in terms

of subjective characteristics such as home, immediate

neighbourhood and other places within which a person

33
operates. Here region is taken as an idea by accepting the

nation as a one point economy, and arbitrarily dividing it

into as many sub-divisions as the need be, independent of

consideration of space^.

An objective definition tries to identify a region in

its seperate entity independent of the individuals that

comprise it. An objective definition is done in terms of

collectivities, viewed from various angles, e.g., political,

geographical, economic, potential, developmental and so on.

The subjective regions are generally subsumed within the

objective region as according to Fisher each individual is

constantly trying to adjust his subjective region to the

7
objective region. Ziolkowski defines a region as a group of

people living together in given area under condition of

mutual interdependence, experiencing similarity of traits and

sharing a sense of common solidarity. Thus in a way region

8
goes parallel to the concept of community also . A region
»
would be itself moving if people belonging to a particular

region move together to* another place. As a social

phenomenon a region has no fixed boundary. The region

therefore be so chosen that it clearly reflects the local

problems, the
urgent need of proximity systems for economic
I jj j : j.
stimulation as wejl*as postulates the efficient regionalised

economic action.

3.1.2. 'Region’, 'Area' and 'Space' these three words often

create confusion while using them interchangeably. An 'Area'

34
is always associated with at least four properties, vis.,

scale, location, content and boundary. It may or may not

possess homogeneity or uniformity as to content, and

organisation. 'Regions’, on the other hand, are those types

of areas which possess not only scale, location, content and

territorial boundaries but

also either homogeneity or
g
organisation or elements of both . "In using the special word

'region’ rather than simply ‘area’ even the layman implies

that the area called by that word stands out in his mind as

being in some way distinct"

10 . Again contrary to 'area’,

'space’ is unbounded. Space by definition involves a three

dimensional boundless void. Space has no structure or

organisation. It is only a setting within which objects can

be located.

3.1.3. It is, therefore, difficult to put the character and

content of a region within a particular set of words. A

region can be perceived in different ways by different

11
individuals depending on their own bias. Myrdal calls it -

‘opportunistic ignorance’ which has caused a considerable

vagueness in the meaning of the word ‘region’. "Many

hundreds of thousands of words have been written on this

topic without coming to a full satisfactory answer. The only

12
safe statements aqet|i jjt&ere is no unique definition ..."

3.1.4. Because of diversity in these theoretical

considerations the system of regional delimitation has become

very confusing. Richardson has classified the existing

methods of delineating a region, into three broad categories;

13
homogeneity, nodality, and programming . According to him

35
an homogenous region is homogenous in respect to certain

factors, e.g., dominant industry, specialised function, per

capita income level, employment level, language etc. In

nodal concept each region has one or more cities or dominant

nodes. Programming regions are also known as planning or

political administrative region and are defined by law and

State policy instruments. Distinguishing homogeneity,

14
nodality and programming, Meyer states "The first stresses

homogeneity with reference to someone or combination of

physical, economic, social or other characteristics; the

second emphasises the so called nodality or polarization,

usually around central urban place; and the third is

programming or policy-oriented concerned mainly with

administrative coherence or identity between the area being

studied and available political institutions for effectuating

policy decisions." Meyer does not find these three

categories mutually exclusive when he says " a so called

programme or policy region is essentially homogeneous in

being entirely under the jurisdiction of some one or few

specific Government or administrative agencies; and " a nodal

region is homogeneous in that it combines areas dependent in

\ ' s. 15
some trade or functional sense or a specific centre”.

3.1.5. Planning regions normally conform to the

administrative boundaries. They have the advantage of

j

offering a definite framework for planning activities. The

administrative frontiers are arbitrary and do not often

conform to homogeneity and nodality. So it is necessary to

36
give due attention to homogeneity and nodality in order to

avoid distortions in the planning process. A planning region

without functional linkage may include modes which have

16
greater interdependence with modes outside the region

3.1.6. The definition given by Malgavkar and Ghiara clearly

emphasises on the factors of homogeneity, nodality and

administrative convenience for a planning region. According

to them "Geographically, it should be a contiguous unit

though it could be sub-divided into plain, hilly track,

coastal belt, lake area etc."

The people of the region should have social and

cultural cohesiveness.

The region should be seperate unit for data collection

and analysis.

The region should have an economic existence which can

be assessed from statistical records.

It should be small enough to ensure local people’s

participation in its development.

It should be under one administrative agency.

. \ ' '

It should not be too small; its geographical size

should be big enough to export resources and avoid

duplication ( by way of partially used capacity in

neighbouring region).
.. ,!*
It should have fairly homogeneous structure.
i

It should have one or more growth points.

t

There should be common appreciation of local problems

and, common aspiration and approaches to their solution; it

3?
should permit and encourage competition but not rivalry or
17
apathy between the area and the other.

3.2. Inter-Regional Disparity and Development Process

Economic development has not been uniformly distributed

18
either over space or time. Certain countries and regions

grow almost exponentially owing to the industrial sector

19
working as the kingpin of the dynamic process of growth ,

while others lag behind. The fact that all the regions have

not developed equally, has been partly due to the lack of

resources, and partly also to the tendency to locate new

investment in the 'easy’ areas or in areas which could

20
generate some pressure on the decision-makers . The

location factors such as the availibility of cheap power,

modern means of transport and communication, banking,

insurance and such other services cause the concentration of

21
industries in a few urban regions , as these factors tend to

cluster mainly in urban areas

22 . Industrial development is a

limiting factor upon which the growth of agriculture as well

23
as the development of human resources hinge . Thus the

process of regional disparity get accentuated with the

economic progress.

3.2.1. Balanced regional development does not mean

| j' !
equalisation of all (the region. Even the rich countries like

USA, UK, France etc. are not free from this problem. The

important thing is not that every type of industry or

agricultural operation should be developed in every region,

but that the level of investment per capita, and more

38
particularly, the level of real income per capita should be
24
made as nearly equal as possible in all areas

3.2.2. The more fundamental target is to reduce; inter

personal disparities, but one cannot reach that target unless

25
inter-regional disparities are reduced . The regional

imbalances usually results in under utilization or even non­

utilization of natural and human resources. As a result, gap

between lagging region and developed region goes on widening

and this may generate the tension which may inhibit the very
26
process of development .

3.2.3. The reasons for these disparities may be stated to be

.. 27
three :

i) historical growth based on natural advantages,

ii) non-uniform distribution of natural resources,

iii) high concentration of resources.

l

Creation of a number of favoured pockets or enclaves of

*

development may be attributed to the historical coincidence

t

"within broad limits the power of attraction today of a

centre has its own origin mainly in the historical accident

that something was once started there and not in a number of

other places where is would equally well or better have been

started and that the start met with success. Thereafter, the
•1 '
I . 's ,
f'
ever-increasing internal and external economies interpreted

in the widest sense of the word fortified and sustained their

continous growth at the expense of other localities and

regions where instead relative stagnation or regression or

negression became the pattern28.

3.2.4. The experience of industrial development in India,

39
 9q
during the British rule amply illustrates this fact

British ruler made some enclaves and favoured them to grow by

providing rail linkage, communication, capital, skilled

worker etc., so that these enclaves could serve as supplier

of raw materials to British industry. Such enclaves never

became part of their internal economic structure except in

the purely geographical and physical sense in many dependent

countries ° . "Economically speaking, they were really an

outpost of the economies of the more developed investing

31
countries. "Even if the initial start is accidental

powerful forces make for a spatial concentration of economic

32
growth around the initial starting points."

3.2.5. The pace of development varies between regions because

natural resources are not distributed uniformly over space.

Regions having high concentration of resources attract more

industry. Industry necessarily tends to become concentrated

in regions where there is already an infrastructure, a

skilled labour force and a market and specialisation of

33 .
functions . Thus industrialisation focuses only on certain

regions, leaving aside or spreading with diluted intensity

over other regions. This ultimately leads to migration of

skilled and physically fit labourers, capital, entrepreneurs

1 . •

etc. to the developed regions. The poor regions are

therefore continually denuded of their resources and the gap

between rich and poor regions gets continually widened. The

circular process of more investment and more income in the

rich regions and the opposite circular process in the poor

40
region;: "tend to become eumn 1ati ve and of lei i to gather spot -d

at. an r m -e 1crab ing rat.e"' . White the dictum 'nothing

succeed;; like s uc c e s s ’ holds true for the tieve loped regions,

the die turn 'nothing fails like f a i l u r e ’ seems: to be true fur

., .. 35
the poor regions

3.2.6. The infrastructure facilities and other amcnbibies in

less developed areas are generally defective and lienee U p’

government concentrates on developed regions so as to

maximise the rate of economic growth. This leads to more

polarisation and such action is generally defended on flo >

ground that emphasising regional balance too early in th<-

development process will mean spill-over of scarce resoun r n

n (i
in a number of regions where they dissipate' making stagnant

region doomed to an even longer period of waiting and poverty

37

3R
3.2.7. According to Williamson ,the inter-regional,

imbalances thus created and sustained, to yield a high level

equilibrium instead of a low level stagnation without

imbalances, diminishes. Williamson supported Mirschrnan who

challenged M y r d a l ’s hypothesis. According to Hi rsohman

"Myrdal’r; analysis strikes me as excessively dismal." In the

first place, he fails to recognise that the emergence of

growing points and therefore of differences in development,

between regions is inevitable and is a condition of further

growth anywhere. Secondly, his pre-occupation with tin'

mechanism of cumulative causation hides from him tin.’

emergence of the strong forces making for a turning point;

once the movement towards North-South polarisation within a

41
 39
country ho preceded for sometime''’ Go according 1,0 the:-

eooriomi si r: the reg iona1 d isparity may be there; in the carl

stage nf d evelopment but they will ultimately ditnlniish and i

is better to have regional balance at a high level obt.ai ik

after a long peri oil of regional imbalances than regiona

balance at a low level.

3.3. Theories Explaining Difference in Regional Growth

The history of regional economics has boon marker! by a

wide variety of contributions to the analysis of inter

regional welfare discrepancies. There is a whole sol, of'

theories for the explanation of difference in regional

/}0
growth, measured in income, employment or production . The

current state of the regional growth theory is very

primitive. This partly reflects the limited time and effort

put into it compared with the vast literature on growth

theory in general. The development of a satisfactory theory

of regional growth has been handicapped by fact that, regional

economists have borrowed too freely from growth theory in

general^. The effect has been to give: too l i t t l e attention

to the special characteristics of regional economies. In

particular, this has meant, a simplistic approach to the

determinants of inter-regional factor flows, possibly the

most distinctive feature of the regional growth process

compared with the national. It has also led to the neglect

of space, distance and location factors that may be of

critical importance in explaining regional growth. It lias in

42
some instances meant a focus of attention on growth in an

individual region, treating that region as an analogue to the

nation, whereas, for many purposes much more light is thrown

on regional development by analysing the process of growth in

42
a system of interdependent regions . Some of the important

theories of regional growth are critically discussed briefly

here.

3.3.1. Neo Classical Models

Neo classical models have dominated the regional

growth theory much as they have dominated growth theory in

43 44
general. The names of R.M.Solow , T.W.Swan and

J.E.Meade 45 are associated with the neo classical growth

theory. Although this theory has been advocated as a model

of regional growth, it is difficult to justify its usefulness

at regional level. The background assumptions of neo

classical growth theory are inapplicable to the regional

economy. The full employment assumption is not usually

relevant to regional economies since regional problems emerge

because of substantial inter-regional differences in the

degree of resources utilisation, particularly labour.

Similarly, perfect competition cannot be assumed in regional

economic analysis since space itself and the existence of

;transport I
costs limits competition. So if the neo classical

model are adopted in their pure unadulterated form there

would be no such field as regional economics*^.

A regional neo classical model might take the following

47
form as described by Richardson

43
 y.l = a-k.
i i
+ ( 1 - a.)l.
i i
+ t l......... (3. 1)

s. _
k. = --- + 2Z k .. ......(3.2)
i j ji

l. = n. + m.. ...... (3.3)

i i =
J
Ji

k ji = f(Ri " R j) ......(3 4)

m . . = f(W. - W.) ......(3.5)
ji i j
where y , k , 1 and t are the growth rates in output, capital,
labour and technical progress, a = capital’
s share in income,
s = savings/income ratio, v = capital/output ratio, k..~
J

annual net flow of capital from region j to region i divided

by the capital stock of region i, n = rate of natural
increase in population, m.. = annual net flow of migrants
0 -i

from region j to region i divided by the population of region

i, R = rate of return on capital, and W = wage. Equation
(3.1) is the standard growth equation, and equation (3.2) and
(3=3) are definitional stating that the growth of factor
inputs is composed of two elements : local inputs and net
imported inputs [ equation (3.3) assumes that the labour

participation rate?(Remains constant]. Equation (3.4) and

(3.5) are the critical elements in the model in atleast two
I
senses; first, the ability to attract inputs from other
regions may be the key force that boosts a region’
s growth
rate higher than that of its neighbours; second, these
equations represent specific testable hypotheses at the heart

44
of neo classical theory - that capital and labour move in

response to differentidls m factor returns.

Neo classical models have attracted much attention from

regional economists for various reasons. First the relative

ease with which ideas in aggregate growth theory can be

borrowed and adapted for regional economic analysis. Second

reason is that the neo classical model contains a theory of

factor mobility as well as a theory of growth. Since inter­

regional factor mobility is such an important element in

understanding regional growth, it is much simpler and more

elegent to explain both endogenous growth and net factor

flows to and from other regions with a single model.

Regions are less self-sufficient than nations so that

trade is even more important for regions than for nations.

But though the importance of inter-regional trade was

recognised early apd; indeedF was emphasized in the title of a

; * ! ; V '- ' ‘ C i. ^ C ' !
seminal work on trad^ ;theory, Beirti 1 Ohl in ‘s Inter regional
‘ i V- ■ v ;■■;'!!?•.
and International trade, 1 9 3 3 , mo^i* iof the theoretical work
* •* I , ,

as well as the, empirical studiedii(op trade have explicitly

Vs •! .1 i{' / f

concentrated on trade between nations rather than between

regions, within a country or a sub-region.

Part of the'^ x^Ijainationj; is that the policy problems

f-
associated with 'intler-regional trade were much less obvious

and apparently less urgent than those arising from

internationa 1 trade., V, In addition,!' there is comparatively

little statistical information on inter— regional and intra-

45
regional trade flow in the case of underdeveloped countrie

like ours, as there is free flow of trade between the sub

regions and within the sub-regions.

There are currently two important theories of

comparative advantage as a basis for international or inter -

regional trade. The first to be developed in the classical

doctrine of comparative costs, which stems from Ricardo and

Mill. Recently, the neo classical theorem of Heckscher-Ohlin

has received extensive study as an alternative theoretical

basis for trade. Regarded as empirical propositions

potentially useful for preducting the course of a nation's

(Regions s) development, the two theories diverge because

they offer different explanations- of the basis for

comparative advantage. The Heckscher Ohlin theory of

comparativei advantage depends upon:—

(a) different productive factor endowments among countries

■
■ i'M
■ C
v
l . ' . . ■•• •
! : / :

(regions) and, V.
1 .", • ’ f\
• t. *" f . r*•
<b) i different factonif^n tensities of (production processes for

different goods * ; 1-

International trade theory is generally based on the

assumption that the productive factors are imperfectly

.mobile. Indeed, tj^ji^ck of factor mobility gives rise to

^comparative advance! df'lin the Heckscher Ohlin framework. If

factors were fully mobile among nations, they would migrate

so that in genera^ competitive ecjui librium the ratio of

marginal physical, products to factor-price ratios would

equal in all nations

46
 If ail the nations used similiar production techniques,

they would have the same comparative costs for all goods and

there would be no basis for trade. The theory of trade

resting on imperfect factor mobility among nations is equally

applicable to regions because productive factors have never

been fully mobile among regions or sub-regions within a

country due to various socio-economic factors particularly in

the less developed countries. Even if full factor mobility

among regions occured, factor-price equalization would

resu1t .

In theory, the Heckscher— Ohlin Theorem depends

fundamentally on the assumption that any commodity is

produced according to a single, linearly homogenous (constant

returns to scale) production function common to all

countries. Leontief's input-output analysis presume this is

so. So appl ication<>of 'regional'^ata may be more appropriate

, l ' * f j ’V * V i i, '' • •' :

than international,data bec:au?^ Jit' ; seems plausible that

regional production *^fjctions'i|V; a jpa,t,ion are similiar

fl '
The objection td international Studies of the factor-

proportion hypothesis involves “factor-intensity reversal”.

If two trading areas;each produce two commodities with

fV
either Leontief fixj^i proportions or Gobb-Douglas production

function, it can bet demonstrated that, if one commodity is

produced with a higjpef} capital1*-labour ratio than the other

at any set of factor prices, it is :SO produced at all sets of

factor prices. This is Samuelson's so called strong factor

47
 in ton's i ty assumption .

The neoclassical model of growth suffers from serious

theoretical limitations. First, it tells nothing about the

characteristics of regional economics. From other branches

of regional economic analysis it is known that certain

phenomena are of some importance : agglomeration economics in

location and urbanisation, transport costs, interdependence

of location decisions, metropolitan - regional relationship.

But these have been neglected in neo classical theory.

Second, in view of the findings at the national level that

technical progress tends to make a larger contribution to the

growth rate than growth in factor inputs, the neo classical

model has given much attention to inter - r e g i o n a 1 factor

mobility rather than to the inter— regional diffusion of

innovation and technical progress.

3.3.2. Cumulative Causation Models

In the circula^ and cumulaitiye causation principles

48
Myrdal argued t h a t j v t h e play 'of fprces in the market
■ jjivv" f'V ■ 4
normally tends to iricineasB,, rather :t^ian to decrease, the
, ■* ■ ■!'
inequalities betweepjjSjrsgions';. ,< Market ■forces lead to the

clustering of increasing returns activities in certain areas

of the economy. Regardless of the initial location advantage

(natural resources, transport facility e t c . ), this build-up

1 1} ; . 1 ■ ■ ;
*■ u • <j! *
Jbecomes s e 1f-sustaining* because-of .increasing internal and
;i :' . ' 49
external economies at these centres of agglomeration

There are two kinds o.f 'effects : 'spread e f f e c t ’ (favourable)

and backwash effect' induced by the prosperous areas which

48
infliicm i' the rate of growth of lagging re g i o ns . Tho r;j•t < ■ nl

effect im-ludo marhof for l.lio primary p r o d u c fs of the 1agg ;1

regions and d i ffus ion of innovation. But thes < ’ ; it

outweigh bed by strong backwash effects - particularly t

disequi 1 i.brating flows of labour, capital, goods and sorv ii••-s

from ltic poor regions to rich regions and thus inhibit:

industrialisation and distort the pattern of production in

the poor regions. Myrdal, v/ho believed that the regional

growth is a d i s e q u i 1 ibrating process, criticised the noi>

classicalists who treat the concept of stable equilibrium an

if it had *teleological si gn if i c a n ce 5 rather than 'as a very

abstract, almost crude and usually unrealistic theoretieaI

assumption. 5 But it is difficult to translate M y r d a l ’s vi ow

into a formal model. In 1970, Kaldor^ suggested a variant,

of the cumulative causation hypothesis which gave a formal

and conc rete shape to M y r d a l ’s ideas. In his paper, Kaldor

argued that the principle of cumulative causation is nothing

more or less than the existence of increasing refunis to

scale in manufacturing . Over and above M y r d a l 5s own

arguments, Kaldor has introduced the export base concept and

argued that the behaviour of a r e g i o n ’s production and

exports, depends upon (a) an exogenous factor, i.e., the into

of growth of world demand for the region's product ; and it)

an endogenous or quasi-endogenous factor, the movement of

'efficiency w a g e s ’ in the region relative to other producing

regions. He defined efficiency wage to be result of ten

elements : the change of money wage relative to the change in

49
'productivity, i.e., \ W/T, where W - money wage index and T

an index of productivity. He argues that relative efficiency

wages determine whether the region’s share in the overall

markets is rising or, falling : in particular, the lower are

the efficiency wages the higher are the growths rate in

output. He further argues that the money wages will be

similar in all regions because of several factors such as the

institutional environment, the effects of inter-regional

labour mobility on the narrowing of wage differentials, and

nationwide collective bargaining. But because of increasing

returns higher grovfth rates in productivity will be

experienced in regions with the faster growth rates in

output, these regions will have a lower efficiency wages.

That is why the relatively fast growing regions tend to

acquire cumulative advantages over the slow-growing regions.

According to Richardson, a circular model at this level

of generality is somewhat unsatisfactory. It does not really

explain why some regions enjoy high growth rate but rather

point that they have high growth rates and why these growth

rates persist. Moreover, the use of the concept of efficiency

wage as the mechanism for explaining how productivity

performance will induce faster growth raises unsettled

question. It is possible for money wages in very prosperous

fast growing regions to rise much faster than elsewhere for

this tendency is not to be offset by higher productivity

growth. The failure of efficiency wages to fall does not

necessarily imply that the growth in these regions will

slacken.

50
3.3.3. The Growth Foie Or Development Pole Theory

The concept of development poles is a recent one in the

theories of economic growth and regional development, and it

is still far from being well established. It hcis

nevertheless, together with similar concepts such as growth

centres, growth areas, growing points, development nuclei,

core area etc., attracted increasing attention in the search

for tools to solve problems of imbalance in inter-regional

development in industrialized as well as in non

industrialised countries. The popularity of these concepts

and the basic idea underlying them, i.e., the alleged

superiority of decentralised concentration of development

efforts as a strategy for speeding up the process of economic

growth and inter-regional integration and equalization, is

well illustrated by the fact that their validity is assumed

to be independent of economic and social systems of the

52
countries within which they are to be applied.

The theory of development poles as evolved by

Perroux (1955) is derived inductively from observations of

the actual process of economic development. Based on the

observation and subsequent recognition of the fact that

'development does not appear everywhere and all at once : it

appears in points, or development poles with variable

intensities; it spreads along diverse channels and has

varying terminal effects for the whole of the economy’.

Perroux was led to consider development as essentially

polarized in the sense that forces inherent in the

51
development process worked towards the clustering of economic

activities and growth, and towards an imbalance between

industries and geographical areas.

It should be noted that Perroux and the French school

of regional economics use the term pole and polarization in a

way different from that usually used in English. To Perroux,

a pole simply means a clustering or a concentration of

element in abstract but also in geographical space - so that

a pole is sticking up like a peak in a more or less plain

density surface. The term polarisation is used to mean the

process by which poles - as defined above - are created and

enlarged. However, since the creation and/or enlargement of

one pole may imply stagnation and even the decline of other-

existing poles, the term polarisation is used as a general

term referring to the enlargement as well as the decline of

poles, i.e.,as the process by which poles succeed each other

during time. On the other hand, the English meaning of the

term polarisation is that of the process by which two

extremes opposing each other attract the elements in between

them. Thus, according to English meaning there will normally

be two poles, while according to the French meaning there can

53
be more than two at the same time.

Perroux developed his theory in search of an

explanation of how, the modern process of economic growth

deviates from Cassel's stationary conception of equilibrium

growth 54 . In doing so he based his argument heavily on

Schumpeter’s theories of the role of innovation and large

scale firms. According to Perroux, entrepreneurial

52
innovations are the prime causal factors behind economic;

progress. He argues that most innovating activities take

place in the large economic units, which are able to dominate

their environment in the sense of exercising irreversible and

partially reversible influence on other economic units by

reason of their dimension, negotiating strength, by the

nature of their operations, etc.

54 The close relation

between scale of operations, dominance, and impulses to

innovate appears to be a most significant feature of

Perroux’s theory, which leads him to the concepts of dynamic

firms and leading industries. A dynamic propulsive firm,

thus, has a high ability to innovate, generates significant

growth impulses to its environment, is relatively large, and

belongs to a fast growing sector.

The Schumpeter theory of development and the theory of

industrial inter-dependence and inter-industry linkages

constitute the two corner stones upon which Perroux based his
55 This concept of growth poles is closely related to
theory.

Perroux’s idea of,an ‘economic space’ as a field of forces

consisting of centres (or poles or foci) "from which

centrifugal forces emanate and to which centripetal forces

are attracted. Each centre, being a centre of attraction and

i
repulsion, has its proper field, which is set in the field of
56
other centres.

Boudeville translated the abstract concept of Perroux’s

space into a regional and geographic context. The regional

growth pole consists of a set of expanding, propulsive and

53
dominant- industries and is associated with agg Joniora t,i<>n

tendencies which are caused by external economies viz., fall

in firm’s cost of production due to expansion of industry,

development of urban labour markets, access to a larger

market etc. Growth poles, however, ensure spread effects and

are therefore regarded as the most promising hope for

regenerating the economy of the backward regions.

The development pole or the growth pole theory does

not, however, solve what Hermansen calls the problem of

establishing both necessary and sufficient conditions for

57
regional economic growth . It takes for granted that growth

at certain poles and external economies thus created would

accelerate the process of growth in whole of the region. As

is feared by Myrdal that 'spread effects’ may be weaker than

'backwash effects’.

3.3.4. Central Place Theories

The theories, which tried to explain the structure of

spatial organisation, were originally developed by

Christaller*’’*^ 1933) and L o s c h ^ ( 1940) under the name of

central place theory. Although they have been further

advanced by Beckmann , von Boventer and Berry0 , their

basic content has not been altered. Both Christaller and

Losch employed a deductive method. Based on the underlying

assumption that man tries to organize his activities over

geographical space in an efficient manner, they contend that

the structure of spatial organization could be deductively

derived and explained with reference to a number of ordering

54
principles governing the formation of his structure.

Christaller and Losch started their analysis with very

similar and extremely simplified assumptions. They assumed a

homogenous plain with even distribution and quality of

agricultural conditions and natural resources. At each point,

the population density is equal, and consumer preferences and

production techniques for each product are also equal. They

based their models on three fundamental factors, namely, the

existence of space exploiting activities, transportation

costs, and scale economies, of which the latter two generally

differ from product to product. Furthermore, they assumed

that each product has a corresponding demand function which

also differs from product to product. Finally, a]1

producers and consumers were assumed to behave rationally.

On the basis of their assumptions Christaller and Losch had

allowed for the empirically found fact that output per plant

and optimum sales a^eas vary among products. For each

product, a hexagonal*market area surrounding the production

site is assumed, because the hexagon is the regular polygon

that in a completely filled plain would come closest to a

circle, which would be optimal from the point of view of the

individual plant. This was first proved by Losch. The

problem of spatial organisation then becomes the

identification of jtljjie resulting spatial distribution of

plants in production having different (a)transportation

costs, (b) demand functions, and (c) possibilities of

63
exploiting economies of scale.

The difference between the two models arises from their

55
different way of treating the key problem, namely, the

combination of the market areas of individual plants in a

systematic spatial organisational structure. As is clearly

pointed out by Von Boventer, they start at opposite ends.

Christaller starts with the good that has the widest spatial

range and develops his organization from above, while Losch

starts at the bottom with the good having the smallest

spatial range and subsequently derives the organization from

below. As a result, the two types of organization that

emerge are quite different. Although one model can be seen

as a special case of the other, it appears that the two

models apply to different types of goods : Losch's model to

transportable commodities and Christaller’s to immobile

services.

Christaller aims at a 'general deductive theory’ which

64
explains the 'size, number and distribution of towns’ , that

is, a positive model explaining the horizontal as well as the

vertical features of spatial organizations. Each good is

characterized by its spatial range and this range is

determined by economies of scale in production and

transportation costs, and by factors pertaining to consumer

preferences, and gives to each good a maximum distance that

people are willing to travel in order to buy it. In order to

f ■'
minimise costs of' movement within the system, plants

producing goods belonging to the same range-class must be

located at equal distances. Therefore, they will be spaced

horizontally at the corners of a lattice of equilateral

triangles. When deriving the hypothetical organisation,

56
Christaller starts with the class of goods that has tho

largest market area, i.e., the national goods, and assumes

that these are produced only at the centre of the system.

The class of goods with the second widest range will also be

produced at the main centre, but additionally in a number of

other centres located at the corners of the market areas of

the most central place. The next class of goods will then be

produced not only in the two classes of centres already

determined, but also in other centres located at the gravity

centres of the triangles formed by the first centre and the

second-class centres. The same procedure is then followed

untill all classes of goods are included, and the location

and market areas of the goods with the smallest range are

reached.

Starting from the same basic assumptions as

Christaller, Losch developed a model of spatial organisation

which has a more elaborate economic base and contains

Chritaller’s as a special case. Losch begins at the bottom

with the goods of the smallest spatial range. These are

l

produced in the smallest centres, which are centrally located

within hexagonal market areas. Starting with the

triangularized lattice of centres and market areas for the

lowest range goods,) Losch shows that there are three possible
. )
types of hexagonal market forms. These are of different size

and they can be repeated at different scales. Taking the

standard network of centres and hexagonal market areas

developed by repeating the three possible forms of hexagonal

markets for increasing scale, each good is assigned to the

57
number of centre*; and corresponding market areas that fit:;

closest to their optimum. 'The lowest order goods j.o.,

agricultural goods, are used to determine the minimum

standard networks. The next lowest order goods will be

produced in plants located at the centre of the smallest

hexagons. Losch superimposed the standard networks of

locations and market areas for each good so that as many

locations as possible coincide and in such a way that in one

of the locations all the goods are produced. This will now be

the superior centre of the entire system. In order to get a

complete determination of the spatial organisation, Losch

seeks the pattern in which total costs of transportation are

minimised, that is, where as many production sites as

possible have been agglomerated by rotating the network

65
around the central place.

Christaller’s theory takes too much account of location

with respect to market whereas Losch’s theory is criticised

on the ground of even spatial distribution of demand,

agricultural population and natural resources. Pointing out

the deficiency in Losch’s model, Isard writes, "It yields

different sises of concentrations of industrial activity and

thus jobs at various production centres and yet it postulates

uniform distribution of consuming population." According to

•I

67 1
Hermansen , the I central place theory does not explain

development phenomena. It is a static theory which only aims

at explaining the existence of certain patterns of centres,

not how this pattern has gradually come into being, and it

says nothing about how the pattern may undergo future

58
 67
oE'iangos .

3.3.5. Theories Of Geographical Incidence And Transmission

Of Economic Development

First attempt to synthesize a theory of geogrpahioal

incidence of growth with a hypothesis of the mechanism for

the geographical transmission of development impulses was

00
made by A.0 . Hirschman . He believes that economic develop

ment does not appear everywhere at the same time and that

once development has appeared, powerful forces will make for

a spatial concentration of economic activity and growth at

69
the initial starting points. Hirschman argues that " there

can be little doubt that an economy to lift itself to higher

income levels must and will first develop within itself one

or several centres of economic s t r e n g t h . " The argument was

based on his theory of economic development as an essentially

unbalanced process propagated through chains of

disequilibria. Hirschman's theory is, in many ways, similar

to French theories of economic development generated by

development poles, inspite of the different conditions and

levels of development on the basis of which they are

70
developed. This can, however, be explained by the fact that

theories
r ,*>
they were both developed as reactions to the balanced

originally developed by Cassel (1927) and

growth

carried
71 72
further by Nurkse (1953), Lewis (1953) and Rosenstein
73
Rodan (1943). Elowever, it should be noted that Hirschman

uses the terms 'growing p o i n t s ’ and 'growing c e n t r e s ’, and

not the French term 'Pole’ . Furthermore, although Hirschman

59
uses the term ‘polarisation’ and 'polarisation effects’, he

does not use these terms in the same way as the F’renoh

school, but in the usual English meaning of widening the gap

between two extremes, namely, between rich and poor areas.

The French theory is primarily a theory of

disaggregated economic growth, while the Hirschman’s theory

deals with economic development including not only economic

variables but also the interrelation between these and

certain social and cultural variables, particularly those

which determine the emergence of enterpreneurial talents.

Starting from the belief that development is necessarily

geographically unbalanced, and that is why every country

needs some growing points where industries can benefit from

localized external economies - technical as well as pecuniary

- and from an 'industrial atmosphere’. Despite exaggerated

space preferences of economic operators,development occuring

in those geographical growth points4 will set in motion the

forces which will induce development in the backward

hinterlands. These ‘trickling down’, forces work particularly

through inter-regional trade and the transfer of capital to

the backward regions. Their effect depends largely on the

existence of oomplimentarities between the industries in the

growth centres and the hinterland. In addition, migration

I .

from the hinterland to the growth centre may absorb some

disguised unemployment and raise the marginal productivity of

labour and the per capita income of the hinterland. However,

in case of weak oomplimentarities, the progress of the growth

centre may have unfavourable polarisation effects on the

6©
hintorlands.

The industries of the hinterland can be depressed as a

result of the competition from the growth centre,

particularly as the transportation facilities are improved.

Owing to better opportunities in the growth centre, the

hinterland can be drained not only of the most able parts of

its labour forces, but also of a significant share of

74
whatever savings there may be. The tendency for the

polarization forces to be stronger than the trickling down

forces was the main conclusion of Myrdal. His ‘spread’ and

‘backwash’ effects coincide with Hirschman’s ‘trickling down’

and 'polarisation effects’.

It appears that Myrdal and Hirschman agree that

development makes for more efficient spread effects.

However, while Hirschman argues in favour of the need for

initial geographical imbalance through the creation of

development centres, Myrdal takes the opposite stand and

argues that the mechanism for spread effects should be

strengthened from the outset.

3.3.6. Theory Of Industrial Location

Localisation of industries in certain regions is an

important reasor| >,for inter-regional imbalances and

disparities. The theory of 'industrial location attempts to

explain among other things why the industries are located

where they are. There may be three factors, namely, cost,

demand and locational inter-dependence for localisation of

industries and as such theories of industrial location may be

61
classified into theories emphasising :

(a) cost factors

(b ) demand

(o) locational inter-dependence

The German economist Von Thunen

75 was first to

emphasise cost factors in the theory of location in the field

of agriculture. Cultivation according to Thunen is arranged

in a series of concentric circles round the town according to

the cost of transportation of the commodity and the ratio in

which its value stood to its bulk and weight. Thus, there

emerges a specific land use pattern in each concentric circle

or ring.

The cost factors were also comprehensively emphasised

76
by Weber . According to Weber, in a circumstance of

competitive pricing, a producer chooses a location where

costs are lowest and the profit is maximum. This least cost

approach is governed by the relative price range of deposits

of materials, the cost of labour, and the cost of

transportation. These regional factors turns to be two in

number namely transportation costs and labour costs if the

material costs are adjusted to transportation costs on the

assumption that costlier materials are of more of distant

origin. They are regarded as the primary causes of the

i

i
regional distribution of industries, as effect of which there
t

appear secondary causes which are agglomerating and

deglomerating factors. While agglomeration refers to an

advantage of cheapening of production due to the

concentration of industry, deglomeration refers to the

62
cheapening of production due to decentralisation following a

rise in land value.

Weber explains the impact of transportation cos he on

location in terms of what he calls material index i.e., the

ratio between the weight of localised materials and the

weight of the product. The location is oriented towards the

consumption centre if the index is less than one and

material-oriented if the index is greater than one. A

location can be moved from the point of minimum

transportation costs explained in terms of material index to

a more favourable labour location if ” the savings in the

labour cost which new place makes possible are larger than
77
the additional costs of transportation which it involves.

Regarding agglomeration and deglomeration, Weber states

that the actual behaviour of industries will depend on the

index of value added by manufacture. This index in relation

to the weight to be transported gives the coefficient of

manufacture. An
industry has a tendency to agglomerate if
7fi
the coefficient is high.

The assumption of proportionality of transportation

cost to distance and the neglect of the role of demand makes

Weber's theory inadequate to explain the spatial pattern of

activity distribution. This weakness remains even after

i i •:
Losch’ modification in terms of profit maximisation as the

criterion for locational choice. Losch neglected supply

almost to the extent that Weber has neglected demand when he

says "only search for the place of greatest profit is

79 80 81
right" . Hoover and Isard find the extent of benefit

63
accruing to a firm from external economies more import.ant

than transportation costs in locational choice. This

refinement too fails to explain phenomena such as the

changing patterns of spatial distribution of economic

activity and differences in the economic structure and

performance of regions.

Thus the classical locational theory with its

modifications presupposes economic rationality, completeness

of information, a static situation, a prediotionable mobility

of factors, inexhaustible entrepreneurship and a fully

developed transportation network and ignores the complexities

of the broader framework of country and region. Most of

these conditions do not exist in developing countries and as

such the theory is ill-suited to their conditions. According

to Alonso, one of the most widespread 'half-truth’ is that of

the treatment given to the issue of transportation cost.1 6

In developing countries, external causes often serve as more

powerful factor for attracting industry. Safety, cost of

time in decision-making, availibility of skilled labour,

83
personal contacts and information linkages ’ are some of the

factors which are more responsible for the spatial

concentration in developing countries. National integration,

‘political stabilibsil-'and defence are also important, factors.

■ ] j‘
Nevertheless, the industrial locational theory provides a

first approximation towards solving locational problems.

3.3.7. Theories Of Geographical Diffusion Of Innovation

Regularities in the geographical pattern and time order

64
of spread of innovation, particularly within rural societies,

have been noted for quite a long time in many countries. It-

was, however, not before Hagerstrand’s pioneering work in the

first part of1950s that a theoretical basis was laid for an

understanding of how the mechanism of the geographioal

diffusion of innovation work and give rise to empirical

84
regularities of a strikingly stable nature.

The theory developed by T.Hagerstrand is inductive in

character, based on careful empirical analysis of the spatial

diffusion process with respect to particular innovations,

especially agricultural innovations. In this model, the

diffusion of innovation is treated as a function of

communication so that delimiting the physical and social

structure of the communications network provides the key to

tracing the spatial spread of innovations. He also showed

how the spatial diffusion process could be simulated by

85
various types of Monte Carlo simulation models

In his conceptualization, Hagerstrand drew upon the

body of relevant sociological and geographical theories, and

arrived at an essentially social theory of diffusion. The

salient features of theory are as follows:

a) The diffusion of innovations comprises two processes

: the dissemination of information about the innovation and

the adoption of the innovation. The first process is ]aigely

a function of social communication; the second is to bo

understood as a complex process of learning,

t
accepting, and

decision-making

b) The spread of information takes place through a

65
number of channels which can be classified in two main group::

: mass media and inter-personal, of which the latter is held

to be the more important.

c) The pattern of social (inter-personal) communication

can be conceived as a network, consisting of nodes (sources

and receivers) and links (channels). The sources and

receivers of information are social actors with definite

locations who establish contacts with each other for a

86
variety of reasons.

The channels of social communication are characterized by a

number of barriers, the most important is the intervening

distances which give rise to the so-called 'neighbourhood

effect'. This implies that the probability of communication

between two individuals is inversely related to the;

intervening distance between them. Hagerstrand considered

only the terrestrial or physical barriers such as lakes,

forest, etc. but social barriers such as status, power,

influence, etc. also could have been included without,

distorting the substance of the theory. The basic unit of

the network of social communication is the private

information or communication field, which shows the spatial

range of the contract pattern of the various individuals.

Some individuals operate at local level field, others belong

to some wider fields of regional level, national level, etc.

Those belonging to wider range fields and at the same time-

having links with people of more limited range form the

channel, through which information is disseminated between

levels. Now, the innovations tend to 'jump' between larger

66
centra; and from centres at higher levels to centres at- lower

levels, while the spread throughout the local zones of

influence is dominated largely by neighbourhood effect and

8*7
barrier effect.

Since the diffusion of innovations is a key process of

development, much attention has to be given to the

formulation of propagation strategies. The most obvious

cases are the various types of extension services in

agriculture, small industries, health, etc. Hagerstrand

suggests that induced innovations should be initially

concentrated utilising the existing system of communication

linkages. Instead of trying to enforce the other patterns of

diffusion, efforts should be made to identify the prevailing

system in order to exploit its facilities and persuasion.

Induced innovation is very important for the developing

economies and that is why the information flows immediately

become of prime importance because they are always

indispensible prerequisites for flow of capital, labour,

and commodities. The information flow aspect is equally

important in centrally planned economies as in market

economies.

3.3.8. Theories Of The Role Of Cities In Regional Development

The first attempt to take a comprehensive view of the

role of city was made by Lampard 88 , as late as 1955, who

viewed the modern urban-industrial development as a cultural

process through which modes of life-values, customs and

socio-economic relations were gradually transformed.

67
According to Lampard, the modern city can only be understood

in its relation to the emergence of industrial technology and

organisation. Indsutrialisation is essentially a process of

technological innovation, which leads to improved

organization, specialisation and division of labour, and

which has strong inherent impetuses to foster continuous and

cumulative progress.

At the most general of level, the relationship

between urban structures and regional development is obvious.

This is particularly so in the great majority of cases when

regional development is based upon industrialisation. As

89
Bos pointed out, urbanisation and industrialisation are; two

aspects of the same process. Urban centres imply scale, anti

scale is the key to specialisation in production, efficiency

and industrial growth. Urban scale also creates external

0

economies, both spatial and non-spatial, which have a

90
cumulative and reinforcing effect upon subsequent growth.

The urbanisation process is closely associated with social

and cultural change that transforms attitudes to economic

progress, capital accumulation and technological advances.

This is because the large urban centre is the arena where the

traditional attitudes clash with the usually more growth-

minded attitudes. This phenomenon has been labelled

j 91
'psychological polarisation' by the growth pole theorists.

Moreover, because of the high level of internal and external

accessibility, cities are particularly conducive to

innovation, and to the spread of their adoption, not. only

within the city but also throughout their spheres of

68
in f luetn'o. "

From the view point of regional growth analysis: the

role of cities is somewhat wider than implied in the 'urban

industrial matrix’ relationship. In terms of intra-regional

efficiency the spatial concentration of people and activities

is an efficient way of organising and distributing regional

resources. However, spatial concentration is not without

limits; it is not necessarily more efficient to continue1 the

agglomeration process untill all regional activities and

population are concentrated in a single urban centre. As

93
Alonso puts it "Many of our most perceptive writers and

sociologists present a picture that does not square with the

equation of the big city and alienation, and which make:;

smaller places appear stifling. It would appear that some

people can lead full and rewarding lives in either kind of

place, some in one but not in the other, and finally, it must

be feared, that some people’s lives will be unsatisfactory in

either."

3.3.9. Growth Foci Model

R.P.Misra extends the concept of growth pole to the

concept of growth foci because of the weaknesses in the

growth pole theory in the context of underdeveioped

94
countries. According to Misra , the main weaknesses of

growth pole theory are :

a) The growth pole theory owing for its origin to the

western economic thought gives an undue emphasis on

industrialisation. It may not be the starting point for

69
economic growth in the backward economy. There is: Ihu*.;

functional rigidity in the theory.

b) In a country like India need for growth demands: that,

the growth poles should lead to the creation of conditions

under which industrial development can occur. Instead of

remaining confirmed to the industrial development they must

function as (i) service centre and meet the day-to-day needs

of the area they serve i.e., function as Christaller’s

central place and, (ii) as innovative and growth promoting

centres.

o) In underdeveloped countries, the growth poles also

have to function as special interaction points . They have

to act as the centres of diffusion of information. Provision

of extension services, educational services, and meeting

places are necessary to accomplish this task.

The spatial economy of India is marked with centralized

concentration with a few metropolitan areas controlling the:

whole economy of the country. They are 'islands’ devoid of

functional links with the surrounding regions, exploitative

in nature and thoroughly disadvantageous to the rural areas.

Their spill-over effects are confined to a very narrow zone.

Mi sra finds in the concept of growth pole the existence of a

functional region within which the human activities are

oriented in a complementary and supplementary way to a

regional centre of1gravity. This centre forms a hierarchy of

growth poles starting from the metropolitan centre to group

of villages. In the context of Indian conditions, according

95
to Misra, a four tier growth foci can be envisaged ” .

70
 1. Service centres at the local level.
. Growth points at the sub-regional level.
3. Growth centres at the regional level.
A. Growth poles at the national level.

Later on, the concept of central village was also added

making the hierarchy five tier. 96 The central village will

offer marketing, recreational and social services for the

community. It will be having a standard primary school, a

sub-post, office, a bank, a co-operative society, etc. The;

service centres will be having a grocery shop, general

merchant shops, high schools, sub-post office, co-operative,

community centre, restaurants, tailor shops, minor repair

facilities or other basic facilities and they will serve as

focal points for social intercourse from where development

informations will spread to the villages and hamlets.

The service centres will be covered by the growth

points which will be the sub-regional innovative and

propulsive urban centres. The growth points will be linked

to each other by State highways and with the service centres

by district or local roads. These points will act as centres

of agro-industries, incorporating activities like production,

and processing of agricultural and dairy products with aim at

social, economic, and emotional integration.

In the next hierarchy, there will be growth centres at

! V

a meso level region. The growth centres will have a

preponderance of secondary activities, manufacturing as their

chief function with tertiary activities next in importance.

They will have large collecting, storage and processing

facilities for agricultural products, radio and/or television

71
station, banking facilities, university and technical

educational facilities and thereby act as countermagnets to

large urban centres. The ultimate of hierarchy will be the

growth poles which will function as the heart of one macro

region performing highly specialised secondary, tertiary and

quarternary activities. 97 They will s€;nd out financial,

technological, and industrial impulses to all centres and

98
points within the area of their command.

The population served in different stages of hierarchy

may be about 6,000 for central village, 30,000 for the

service centre, 150,000 to 175,000 for the growth points,

about 1,200,000 for the growth centre arid about 2 crores for

the growth pole. Such linked pattern of hierarchy aided with

institutional infrastructure provisions would lead to

decentralized concentration avoiding any danger of over-

urban isat ion or of depressed areas.

3.3.10 Regional Development Potential Theory

99
According to Nijkamp , the basic idea of this theory

is that regional disparities are the result of long-run

developments and not of short-term .cyclical fluctuations.

Consequently, much emphasis is placed on the supply side and

hence on the capacity side. The reason is that a region is

too small in comparison with the total economy for exerting a

significant influence on total demand and hence total demand

is considered as given. So the problem of regional

disparities is essentially a comparative allocation problem,

vis., which share of total demand will be attracted by the

72
successive regions in an open spatial system? This- also,
100
according to Biehl , explains the degree to which regions

succeed in utilizing their production capacity, so that the

question as to which factors determine the regional

development potential becomes crucial.

The regional development potential depends on :

a) Regional potentiality factors (such as availibility

of natural resources, locational conditions, sectoral

compositions, international and national linkages and

existing capital stock)

b) Mobile production factors (such as various kinds of

labours and new investments).

Potentiality factors for capital can be subdivided into, (a)

material and immaterial capital, and (b) private and public

capital. Infrastructure capital is essentially public

capital which may be either material or immaterial. These

potentiality factors determine the regional development

potential, although the impacts of these factor may differ,

depending on their mobility, indivisibility, non-

substitutability, polyvalence and non-exclusiveness. By

means of these five characteristics the regional potentiality

factors may be distinguished, directly or indirectly, from

other productive resources.

The emphasisi of the regional development potential

theory on public capital is extremely important for regional

infrastructure policy, because, such a policy may be an

effective tool in coping with the problem of spatial

disparities. Infrastructure, which is regarded as most

73
irnport.anl. public capitaJ, constitutes the; foundation of all

other socio-economic activities. Although regional

development essentially a multidimensional concept, it. is

very often limited to employment, production or income

indicators. Regional disparities can be regarded as

discrepancies between regional profiles composed of relevant

indicators. A major aim of many regional policies is to

reduce disparities, so that the overall picture of the

economy is more in agreement with socio-economic objectives

equity. 101
. ,.
regarding

There is usually a wide variety of different regional

objectives. Furthermore, these objectives are not the same

for all regions and atleast do not have same weights, while

they also have to be placed in the context of a national

102
policy. Objectives of socio-economic policy may be, among

others:

a) To reduce unemployment

b) To increase average income

c) To improve regional amenities

Consequently, regional policy may focus on both an

improvement of the elements of this regional welfare profile

and a reduction in the inter-regional discrepancies among

these profiles.

The fulfilment of these objectives requires many policy

instruments. These instruments can be subdivided into macro-

economic instruments (oriented to changes in average income

and in expenditures) and micro-economic instruments (oriented

to individual house holds or entrepreneurs in order to modify

74
 103
the allocation of production factor:; ). This once ninn-

illustrates that infrastructure is only one: of the

instruments to improve the development of a certain region.

There are two main lines to realize regional

development objectives with the help of infrastructure

instruments, viz., an expenditure policy and a price policy.

An expenditure is a Keynesian approach based on the idea

that a too low volume of demand has to be increased by means

of public expenditure stimuli. A price policy includes

measures which affect the relative factor prices.

In the short-run infrastructure policy is often an

expenditure policy, where public investments stimulate the

local and regional demand via a multiplier\aoeelerator

mechanism. At the same time, the creation of social overhead

capital will stimulate the economic development potential of

the region at hand. The creation of such public capital is

extremely important in order to fulfil the needs of lagging

regions, especially in the case of a low accessibility and

poor locational conditions of those regions. Thus

infrastructure policy may have both a direct effect via the

impacts on the demand sector and an indirect effect via the

104
change in development conditions.

3.3.11. The Concept5Of Industrial Complexes

Within the framework of planned development, there

has emerged a concept related to methods of industrialization

with a certain resemblance to French concept of poles of

growth in organisational and industrial spaces. In spite of

75
its close connection with centrally planned economies, this

concept of industrial complexes appears to have a much wider

potential applicability especially as a means of

implementing regional schemes of industrial development. An

industrial complex may be defined, in a very wide sense, as

an ensemble of technologically and economically

interconnected industrial units usually located on a given

territory. Such a complex is normally a planned one, based

on common physical infrastructure and developed around one

major industry, which forms 'core' or the focal point of the

1 0 >5
complex. The core often appears to be a heavy industry.

The advantages of the creation of industrial complexes

by Alayev. 106
, . , ,
are as stated

a) Substantial economies in investment expenditure.

The investment needed for the whole complex is less than the

sum of the investment for each enterprise planned and located

in isolation.

b) More efficient production due to the benefits of

specialisation, economies of large-scale operation and the

organisation of common managerial and infrastructural

facilities.

c) Possibility of co-ordinated exploitation of the

natural and raw material resources of the area of location.

d) Opportunities for close contact, rapid diffusion of

technological innovations and rapid over-all development of

the complex.

Industrial complexes may be classified as belonging to

extracting industries, energy, building materials,

76
metallurgy, machine-building and chemical industr ies , ligld

and food industries, or having a mixed character (petroleum

extraction plus petrochemical industry, iron and steel work:;

plus engineering etc.)- The complexes based on agricultural

raw materials are known as 'agro-industrial complexes'.

The concept of an industrial complex should not be

confused with those of industrial estates and industrial

zones. The industrial units composing the latter may not be

interconnected apart from sharing some infrastructural and

auxiliary facilities, while the intimate technological and

economical interdependencies are basic characteristics of this

former. In an industrial complex these interconnections are

directly planned in order to ensure an optimal composition of

the entire complex involving also the economic and socio­

cultural infrastructure, auxiliary and servicing plants, and

plants working for the local consumer market. Consequently,

the setting up of the complex, i.e., the time sequence of

107
establishing the various units, is also planned.

77
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84