Economic Growth in a Central Place System

Abstract

To study economic growth in the urban system of advanced countries under the heading of central place systems may seem to be taking an unnecessarily narrow view. But, as I shall argue, it is a rather natural approach provided central places are interpreted in a sufficiently broad sense. Observe that the division of labor (and thus the location of economic activities) in a spatial economy is governed by two radically different principles. First, by comparative advantage based on endowment with immobile regional resources — agricultural soil, mineral and energy resource deposits, climate — and even technical and organizational knowledge embodied in local traditions. The second principle is the trade-off between transportation costs and economies of scale. Both principles are needed in an analysis of spatial growth processes, the first giving rise mainly to ad hoc explanations to be considered only in passing here. The focus of this paper is on the returns-to-scale aspects. It is these, after all, that give rise to an urban system in the first place.