Appunti sulle lezioni di Regional Economics + Land Rent Theories - I e II parziale

AGRICULTURAL RENTCENTER

= r + r + r

If we consider 2 points of the city, like A and B, the only(Milan) agr diffA abs component of rent that change is the differential rent.

r' = r + r + r(Paris) agr diffB abs

ABSOLUTE RENT

Is the value of land rent which is independent from the position of the land with respect to the distance from the city centre.

When you buy a house in Milan, you pay the rent with respect to:

• the position
• The characteristics of the city

ABSOLUTE RENT= it represent the advantageliked to having a base in a better location

r' r r r= + +agr diff abs

Here you pay a part of the price because of the particular characteristic of the place

Both in the large city and in small city you pay a similar price concerning the distance from the centre.

r is the difference in land rent due to distance from the centre.

dAbsolute rent is the fixed component of rent in a city, that is due to the particular advantages of being in that city. R r r

According to Marx, the end of the city

Il valore dell'affitto in quel punto è = +agr absProcess: Secondo Ricardo, R in terreni marginali = 0. Secondo Marx, il proprietario terriero non darebbe mai via la sua terra gratuitamente, quindi anziché avere R = 0, ritira quella terra e crea scarsità. La scarsità provoca l'aumento degli affitti terrieri. Quindi, secondo Marx, la terra al margine della città ha un affitto > 0. L'affitto della terra al margine della città ha un valore superiore all'affitto della terra rurale. Marx chiamò questo affitto "AFFITTO TERRENO ASSOLUTO". Conclusion: r rPer avere il valore reale della terra dobbiamo sommare il +diff abs. Alonso e Vön Thunen hanno detto che il confine estremo della città inizia dalla terra rurale. Rurale: solo affitto agricolo secondo V.T. e A.Città Quando una città è più grande di un'altra: Milano è più grande di BG, quindi avrà un r più alto. Inoltre, quando la città è soggetta a una ristrutturazione, l'assoluto aumento dell'affitto aumenta perché la città attira più persone. r 'r r rLa differenza in

global land rent (R) amongst different cities is caused only by the absolute difference in agricultural productivity (∆ine) and the absolute difference in accessibility (absR).

HIERARCHY AND LOCATION

3.1. Hierarchy and urban systems

The theories presented in this chapter seek to account for the existence of an urban system made up of cities of different sizes. The aim of these theories is to formulate rules able to interpret the urban hierarchy by explaining:

• the size and frequency of urban centres at every level in the hierarchy, and therefore the market area of each of them;
• the distance between a particular city and those at an immediate lower level than it, and therefore the geographical distribution of all the urban centres.

The founders of this school of thought named "CENTRAL PLACE THEORY" were Christaller and Lösch. They were the first to formulate models able to explain the urban hierarchy.

3.2. The geographical approach: Christaller's model

Christaller's model is based on the assumption that an urban centre exists where there

are goods and services to be traded. This “central place” must produce or supply goods or services to a population which is spatially spread across a uniform and isotropic surrounding territory.

The aim of the model is to show HOW products and services come to be territorially organised into an urban hierarchy.

For this purpose Christaller introduce two concepts that express in geographical terms the economic forces that organise activities in space, these two concepts are:

• threshold: circular area, with sufficient population around the supply centre, that generate a level of demand such that makes the service profitable.
• range: the maximum distance that consumers are willing to travel in order to purchase a service/good.

A service is provided if and only if the range exceeds the threshold.

In other words, a service is produced only if there is sufficient demand for it to be supplied at a profit.

In equilibrium, the circular market areas defined by the range of the service.

assumes the shape of a hexagon. This shape allows Christaller to maintain three fundamental assumptions:

1. Minimisation of transportation costs for consumers;
2. Distribution of the service supply, the territory is covered without unserved areas;
3. Competition among producers, this requires that market areas must not overlap!

According to Christaller, each service has a range that determines the size of its market area: high-quality services, produced and supplied in large urban centres, have a more extensive range that delineates market areas broader than those in which lower-quality services are supplied. Having defined the regular hexagon-shaped market areas where an n-order service is supplied, Christaller identifies the market areas of the immediately lower-order service. He hypothesizes for this purpose that the first relative production units of the lower-order service choose to locate in the central place where higher-order services are already being produced, that is, the centres of.I esagoni in modo che possano beneficiare delle economie di agglomerazione. Organizzazione delle aree di mercato secondo i tre principi di Christaller. Questi scelgono le loro posizioni secondo tre diversi principi che Christaller immagina come modellatori delle aree di mercato nello spazio: 1. il principio di mercato: postula che la posizione equidistante da una triade di centri di ordine superiore rappresentati dai vertici dell'esagono di dimensioni maggiori. L'ottimizzazione di questa posizione soddisfa il criterio di minimizzare il numero di centri in grado di coprire tutto il territorio del mercato di ordine superiore. 2. il principio del trasporto: si applica a una posizione equidistante da una coppia di centri di ordine superiore. Questa scelta ottimizza la posizione dei centri di ordine inferiore sulla base della minimizzazione dei costi di trasporto verso i centri di ordine superiore. 3. viene identificato dalla posizione al centro dei triangoli che compongono l'esagono, in modo che lo scopo dell'ottimizzazione sia quello di evitare che i centri di ordine superiore competano per amministrare quelli di ordine inferiore.

The model thus generates a hierarchy of urban centres: for each centre of order n there are k centres (market areas) of order n-1; k is the factor of proportionality between the centre of a certain order and the one immediately below it and it assumes value 3, 4 or 7 according to the predominant location principle. In Christaller's model, this proportionality factor is constant throughout the urban hierarchy.

For each k, simple rules can be applied to obtain the number of centres of each order, the distance between the centres of each order and the size of the market area.

Each large centre produces the goods/services relative to its hierarchical level and all lower-order goods/services. Christaller's model therefore generates a system of hierarchical spatial relations that gravitate on the surrounding market area. Although the model is mainly geographical in nature, it gains internal consistency from the economic postulates on which it is based.

- optimal behaviour by consumers

(minimise transport costs so that they can purchase the service offered)- homogeneous geographical space in which the agglomeration of activities comes about for economic reasons- a transportation costs proportional to the distance covered- existence of economies of scale- equity in supply of service, the territory must be covered in order to give access to all goods/services to all consumers

When Christaller applied his model to reality he obtained surprising results.

It should be stressed that Christaller’s model is able to demonstrate the existence of an urban hierarchy in which each city of a certain size performs a specific function. The model is able to furnish rules with which to identify the number of centres of a certain order, the size of each market area of each centre, the distances among centres of the same order and their geographical distribution.

3.3. The economic approach: Lösch’s model.

3.3.1 The original model

In 1940 Lösch developed a general

generates this equilibrium by considering factors such as competition among firms and consumer rationality. The hexagonal structure of market areas is determined by the lowest price offered by suppliers and the proximity to consumers. Lösch defines market areas based on explicit costs and demand curves of goods, taking into account Chamberlin's monopolistic competition market. This approach ensures spatial equilibrium within each sector. The model aims to achieve a stable economic equilibrium in the hexagonal market areas, where firms no longer have incentives to enter the market. Lösch's model addresses the limitation of Christaller's theory by considering varying factors throughout the urban hierarchy.

identifies several factors of proportionality (nesting coefficients) that operate up the urban hierarchy. Lösch assumes that there is a specific value of nesting coefficient and therefore a specific size of the hexagonal market areas, corresponding to each type of good or service.

Relaxing the assumption of a proportionality factor constant throughout the urban hierarchy has significant consequences. It eliminates the two-way relation between size of the centre and specialisation, and it enables consideration to be made of such important empirical situations as:

• the different functional specialisations of centres of the same size;
• the possibility that centres have functional specialisation.

Analitica analysis are unsatisfactory. The final structure of the territory is obtained by rotating the superimposed hexagons to obtain the maximum density of centres in some areas, and the maximum coincidence of different production locations. The result is a series of circular alternate sectors.

1. of high and low settlement densities.
2. Mathematical formalisation

Like Christaller's model, Lösch's has also attracted the interest of numerous economists.

The formal approach uses five equations to state the economic conditions that the model regards as crucial for achievement of general spatial economic equilibrium.

The latter arises from 2 specific factors:

1. each producer seeks to maximise his/her profit;
2. each consumer seeks to maximise his/her utility by accessing the least costly market.

The conditions are the following:

1. locations of producers must be the most advantageous possible;
2. number of possible locations must be such that coverage of the entire territory is guaranteed;
3. extra-profit must be nullified;
4. firm's volume of production and size of its market area must be as small as is compatible with its average production costs;
5. good's sale prices on the border between market areas must be equal, in order that consumers have no incentive to cross the border to buy the good in the other market area.