Infrastruct ure in
Regional Developme
nt
Regions and countries
✖ The difference between regions and countries is not always very clear (for instance, several
Indonesian regions are larger that many countries in Europe).
✖ The major distinction in most cases is the fact that regions are open spatial entities (in contrast to
countries).
✖ Regions display a spatial subdivision of a country.
✖ Therefore, the competence of a region may normally be superseded by the nation.
✖ And, in most cases, regions are characterized by a distinct degree of spatial diversity.
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What is Regional Development?
Regional development is about the dynamics of geography of welfare in the world.
It refers to the complex space-time dynamics of regions (or an interdependent set of regions).
In practice, the Gross Domestic Product (GDP) per capita (or growth therein) is used as a statistical
measurement/approximation.
Some other alternatives or complementary measures are also used: as per-capita consumption, poverty
rates, unemployment rates, labor force participation rates or access to public services.
Today we also have Human Development Index as the measurement.
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Why is Regional Development?
✖ The motives to measure regional development are various:
○ The prominent argument is that the welfare of region will influence the welfare of the people .
how is regional welfare created? (‘allocative efficiency’)
○ The other prominent positions is the welfare
position of regions or nations may exhibit great
disparities (regional disparities, marginalization or peripheralization of some, spatial justice/injustice).
how is regional equity created? (socio-political justice/equity)
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Regional Development
Regional development is clearly a multidimensional concept with a great socioeconomic variety
It is determined by a multiplicity of factors such as:
○ natural resource endowments,
○ quality and quantity of labor,
○ capital availability and access,
○ productive and overhead investments,
○ entrepreneurial culture and attitude,
○ physical infrastructures,
○ sectoral structure,
○ technological infrastructure and progress,
○ open mind,
○ public support systems, etc
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Location of Human Activity and Regional Development
✖ The history shows an interesting geographic pattern in which human activities cannot occurs in every
places:
○ The location patterns of people and economic activity in our world show apparently a great variation.
○ Some places are created as large agglomerations, and some are still inhabitable, and even have no activities.
○ There are some decisive factors for human activities and settlements, where accessibility (e.g., river
banks, coastal areas) and favorable physical- geographical conditions (e.g., climate, natural resources endowments) provide great influences.
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Location of Human Activity and Regional Development
✖ Regional development appeared to be contingent upon the existence of large economic attraction poles, and location of economic activity created the foundations for regional welfare.
✖ Location theory has played a central role in explaining the dispersion of economic activity, as well as the
dispersion of welfare among regions.
✖ Consequently, regional development theory is deeply rooted in location theory.
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Impact of infrastructure on Location of Activities
✖ The classical location theory are made up of a blend of physical geography (determining the
accessibility of a location and the availability of resources) and smart economic behavior (through a clever combination of production factors and market potentials in space).
✖ However, location patterns are never static. They have an endogenous impact on newcomers. The incumbent firms may attract others through scale, localization and urbanization advantages.
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Impact of infrastructure on Location of Activities
✖ In this context, agglomerations tend to become self- reinforcing spatial magnets impacting on the entire space-economy. Such concentrations of economic
activity create welfare spin-offs for a broader regional system and thus determine the geographic patterns of welfare and regional development.
✖ This creates a blend between location theory and urban economics or urban geography.
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Impact of Infrastructure on regional development
✖ Today, we have witnessed the emergence of the digital economy through which actors could be networked world-wide.
✖ As a consequence, the interaction between industrial networks and location as well as the access to
telecommunication networks has gained much interest.
✖ Locations that offer the best available network services are the proper candidates for many firms in the ICT,
high-tech and high services sectors and are able to generate a high value added to regional development
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Impact of Infrastructure on Location Activities
✖ In addition to the presence of labor as capital on
traditional factor inputs, the availability of and access to infrastructure is another critical success factor for regional development:
○ The presences of training and educational facilities are essential.
○ Transportation and logistic infrastructure shrink the distances.
○ Space-time accessibility of regions becomes a critical determinant of relative regional economic positions.
○ Communication and Information infrastructure become also main ingredients.
✖ The roles of physical infrastructure are importance for regional growth.
✖ The uneven provision of infrastructure have also been identified as a key determinant of regional income
disparities in many countries.
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Regional Policies
✖ Although, regional development is essentially a multidimensional concept, it is very often limited to regional growth that concerns to employment, production or income indicators.
✖ It also concerns on regional disparities (discrepancies between regional profiles composed of relevant indicators).
✖ These two issues have become the fundamental aims of major aim of many regional policies.
✖ In general, regional policy will focus attention on both an
improvement of the elements of a regional welfare profile to
create growth and a reduction in the interregional discrepancies among these profiles to reduce disparities.
✖ The fulfillment of these objectives may require various policy instruments (subsidies, tax measures, prohibitions, etc.).
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Infrastructure in Regional Policies
✖ Infrastructure is only one of the instruments of regional policies for regional development (improving the
development of a certain region).
✖ In a narrow definition infrastructure refers to the
transport infrastructure, ICT, energy sector and public utilities (water and sanitation),
✖ Broader definition of infrastructure also includes
housing, health system, science and education, culture and police
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Infrastructure in Regional Development
✖ Infrastructure may be a very important one, because it constitutes the foundation of many other socio-economic activities in a country or region, but infrastructure cannot guarantee regional growth:
○ Wrong infrastructure (not connected with the development potential of a region) cannot bring impact for the regional growth.
○ Wrong coordination of infrastructure instruments with other policy instruments might lead to serious repercussions (bottlenecks, e.g.) for the development potential of a region.
✖ Thus, infrastructure policy is a conditional policy for regional development: that cannot guarantee a
favorable regional development, but it creates the necessary conditions for an achievement of regional development objectives.
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Infrastructure in Regional Development
✖ Underdeveloped infrastructure can be considered as
important obstacle to the regional development, and its improvements could spur the economic growth in the region.
✖ Thus, infrastructure policy is a conditional policy for regional development: that cannot guarantee a
favorable regional development, but it creates the necessary conditions for an achievement of regional development objectives.
✖ Underdeveloped infrastructure can be considered as important obstacle to the regional development, and its improvements should spur the economic growth in the region.
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Infrastructure in Regional Development
✖ Richardson and Jensen (2000) indicate that spatial
differences cannot be reduced without a fundamental improvement of transport infrastructure and services to and within the regions where a lack of access to
transport and communications infrastructure restricts economic development.
✖ Improvements of accessibility are seen as a critical priority in the development and precondition for
inclusion of economic development within an overall spatial strategy of harmonization.
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Infrastructure in Regional Development Theories
✖ In the unbalanced growth theory, Hirschman places much emphasis on public
infrastructure investments (or social overhead capital).
✖ These are basic investments that constitute the necessary conditions for primary,
secondary and tertiary activities and take place inter alia in the field of education, medical care, socio-cultural amenities, transportation infrastructure and so forth.
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Infrastructure in Regional Development Theories
✖ This unbalanced growth theory is closely related to a more modern version, named regional development potential theory.
✖ The persistent regional disparities are essentially a result of long-run structural
developments in a system of regions and not of short-term cyclical fluctuations in income or demand.
✖ The reason is that a region is too small and open - in comparison with the total world economy - for establishing an independent economic position
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Infrastructure in Regional Development Theories
✖ Consequently, much emphasis is placed on the supply side and hence on the capacity side.
✖ The problem of regional disparities is then essentially a comparative allocation problem, viz.
which share of total world demand will - given the technological, institutional and infrastructure
conditions in an open spatial system – be attracted by the successive regions?
✖ In this context, the regional development
potential indicates the maximum production capacity of a region, given its available
infrastructure facilities.
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Infrastructure in Regional Development Theories
✖ Therefore, the regional development potential depends in general on two factors:
○regional potentiality factors (such as availability of natural resources, locational conditions, sectoral composition,
international linkages and existing capital stock);
○mobile production factors (such as various kinds of labor and new investments).
✖ In this framework, infrastructure capital is essentially a public, immobile regional
potentiality factor which may be either material or immaterial.
✖ The emphasis on public capital is extremely
important for regional infrastructure policy, as then public policy may become an effective tool in coping with the problem of spatial disparities.
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Infrastructure in Regional Development Theories
✖ In general, two impacts of a regional infrastructure policy :
✖ In the short run, (a direct effect) infrastructure policy if often an expenditure policy, where public
investments stimulate the local and regional demand via a multiplier/accelerator mechanism.
✖ In the long run, (an indirect effect) the creation of social overhead capital will stimulate the economic development potential of the region at hand.
✖ The creation of such public capital (the two effects) is extremely important in order to induce structural changes, in lagging regions, especially in the case of a low accessibility and poor locational conditions of these regions.
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Infrastructure in Regional Development Theories
✖ Therefore, infrastructure is a very important (though not the exclusive) potentiality factor for regional
development.
✖ It has some features that distinguish it from other potentiality factors:
○ a high degree of publicness (in contrast with the frequent private goods properties of other
resources);
○ a high degree of immobility (meaning that the
costs of a spatial mobility of infrastructural facilities are very high);
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Infrastructure in Regional Development Theories
✖ It has some features that distinguish it from other potentiality factors:
○ a high degree of indivisibility (implying that the separation costs of such public capital are very high, so that usually problems of over- and
undercapacity arise);
○ a high degree of non-substitutability (implying high costs for transforming infrastructure capital into alternative or complementary uses);
○ a high degree of monovalence (so that the costs of employing infrastructure in a less specialized way are very high).
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The contribution of infrastructure to regional development is the stage of
development (Nijkamp 1982)
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The contribution of infrastructure to regional development is the stage of
development (Nijkamp 1982)
✖ I: underdeveloped regions which have insufficient infrastructure equipment (for instance, peripheral and rural areas).
✖ II: regions which are reaching the "take-off' stage, so that the
minimum infrastructure requirements for a growing economy are fulfilled.
✖ III: rapidly growing regions which have a sufficient infrastructure endowment.
✖ IV: regions which are characterized by a "drive to maturity" and which show the first signs of negative externalities related to a rapid growth.
✖ V: regions which have grown rapidly but which cannot grow any more due to bottlenecks in the infrastructure endowment.
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The role of investment in transport infrastructure
Goodwin (2000), it is incorrect to intuitive assume positive interaction with regional development:
✖ There are no automatic economic or employment benefits from new transport projects:
✖ Actually, some projects may even be harmful;
✖ For projects that produce economic benefits, the more economically deprived end of the link may still
experience greater economic costs than benefits;
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Infrastructure in Regional Development Theories
According to Padjen (1996) there are three
theories that explore the relationship between infrastructure and development:
✖ Development through a surplus of infrastructure;
✖ Development through a deficit of infrastructure;
✖ Balanced development.
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Infrastructure in Regional Development Theories
✖ When infrastructure capacity is higher than
production, it is assumed that infrastructure will have an initial and inductive role in economic development.
✖ The rationale behind this approach is that the
existence of infrastructure is a prerequisite for the development of other activities.
✖ This concept is still used in less developed countries.
However, experience has shown that physical
infrastructure, i.e. objects per se cannot guarantee economic development
.
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Infrastructure in Regional Development Theories
✖ If economic growth is based on development and growth of production, as a logical link a pressure to invest into new infrastructure will be created.
✖ The idea is that production will speed up investments into infrastructure and create growth potentials.
✖ Of course, a minimum of existing infrastructure is requested. This approach is usually applied in developed countries.
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Infrastructure in Regional Development Theories
✖ Balanced development is focused on the idea that only the simultaneous development of infrastructure and production is sustainable, explaining that infrastructure is an integral part of production chain and its function is
economic growth.
✖ These theories also provide the framework for analyzing the link between the transport
infrastructure development and regional development
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Role of Transport Infrastructure in Regional Development
✖ Transport infrastructure has a specific role in regional development. For a long time it was assumed that transport infrastructure has only a positive impact on regional development.
✖ However, the role of transport infrastructure on regional development is evaluated through
direct but also indirect effects, albeit whether they are positive or negative ones.
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Direct Effects of Transport Infrastructure in Regional Development
✖ Building of transport infrastructure directly influences transport costs (decrease in fuel
consumption, capital consumption as well as a decrease of the related compensations for
employees).
✖ Changes are followed by changes in transport mode, transport route, time horizon and
accessibility of movements within the region.
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Direct Effects of Transport Infrastructure in Regional Development
✖ Reduction of transport costs combined with migration changes of households and business location leads to the increased
productivity of the regions.
✖ Within households, decrease in travel times leads to the achievement of the same level of productivity but also consumption in a shorter time.
✖ It also stimulates elasticity relating to the migration process.
✖ Within the business sector, transport improvements lead to the effectiveness of production and positive impact on the ‘just in time’ principle.
✖ In the labor market, commuting time is significantly reduced.
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Direct Effects of Transport Infrastructure in Regional Development
✖ Reduction of transport costs also leads to the increased accessibility of the region, increased
productivity and increased regional accessibility could impose an increase of economic activity.
✖ Vickerman (1991) summarizes such effects into two groups:
○ Objectively measured effects, reflecting changes in inputs and outputs of industries due to the changes in transport, and
○ Subjective effects referring to changes in the perception of a region.
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Indirect Effects of Transport Infrastructure in Regional Development
✖ Indirect impact of building of transport infrastructure can be analyzed through
changes of attractiveness of the monitored region, size of movement of goods and
services and changes in the size of transport costs, i.e. changes in relative competitiveness of the regions.
✖ In addition to these changes, indirect effects also refer to changes in the environment, i.e.
noise, air pollution, changes in the landscape, etc
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Indirect Effects of Transport Infrastructure in Regional Development
✖ If the less developed region, under indirect effects another two categories of impacts are considered:
✖ Impacts on income are impacts derived from the time travel savings and reductions in vehicle operating costs, which directly influences the size of transportation costs. Within this category alone indirect benefits from the development changes within the region are considered, such as improvements from the building of new or improved existing infrastructure.
✖ Impacts on capacity refer to the increase of regional production capacities. For example, increased transport capacity can
increase the export potential of the monitored regions.
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Indirect Effects of Transport Infrastructure in Regional Development
✖ In the less developed region, under indirect effects another two categories of impacts are considered:
○ Impacts on income are impacts derived from the time travel savings and reductions in vehicle operating costs, which
directly influences the size of transportation costs. Within this category alone indirect benefits from the development
changes within the region are considered, such as
improvements from the building of new or improved existing infrastructure.
○ Impacts on capacity refer to the increase of regional production capacities. For example, increased transport
capacity can increase the export potential of the monitored regions.
✖ Within developed regions, changes in transport may bring only marginal benefits so transport improvements have the greatest impact when they remove a former bottleneck.
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Effects of Transport Infrastructure in Regional Development
Nijkamp et al (2002) have summarized the basic effects of motorway building
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Effects of Transport Infrastructure in Regional Development
Socio-economic impacts of new motorway on different spatial levels
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Effects of Transport Infrastructure in Regional Development
Socio-economic impacts of new motorway at different temporal levels
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Effects of Transport Infrastructure in Regional Development
Socio-economic impacts of new motorway at different sectors
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Thank You
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