GLBL ST 1 Lecture Notes - Lecture 14: Offshoring, Outsourcing, Dont
Week 7 Lecture 2: Continued
B: Changing Economic Logic for Locating Production
1. Location of Jobs: (graph shows relatively evenly spread but concentrated job gains/losses in big cities→
huge expansion in jobs; pretty variegated→ localized patterns)
i. Large amount of GDP growth in esp. Metropolitan (urban) areas and specialized
industrial districts (e.g. Silicon Valley)
b. Where are core economies growing in population and incomes?
c. Some big cities (metropolitan/urban areas)
d. Some specialized industrial districts (e.g. Silicon Valley)
i. Concentrated, specialized, cluster of firms located in the same place
ii. Concentrated # of new business starts as well
2. Three trends: decreased transport costs: vertical disintegration of large firms (outsourcing),
agglomeration economies
a. Decreasing transport costs as part of production costs: making locations more footloose, less
friction in moving people, things,products
b. Continual disintegrating of large firms; why do we have large firms anymore? Now just a
mechanism for outsorucing (even if not offshoring)
c. Increased role of agglomeration (localization and urbanization) economies in core economies
i. E.g. Silicon Valley; localization valley--locating close to people who do similar things to
you (same industries)→ lots of advantage
ii. Big cities provide for urbanization economies→ services that small cities cannot support
(e.g. banking sector, etc)--> work intimately with businesses within that sector
3. Aglomeration economies
a. Local suppliers/specialized services
i. Can’t find them anywhere else
b. Local specialized labor pools
i. Lifestyle preference (want to live in san francisco rather than north dakota)
ii. Training programs available
c. Local learning effects
i. Learning from other firms, what to do and what not to do
d. Trust and collaboration from face-to-face interaction
i. Face-to-face interactin (trust?) still important
ii. Following the “buzz” (gossip) about other businesses,
4. Regional Motors
a. The matrix of transport/communication costs vs. agglomeration economies
b. Six scenarios
Transport/Communication Costs
Agglomeration
Economies
Low
Medium
High
(returns to
agglomeration→
benefit of
agglomeration
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
B: changing economic logic for locating production: location of jobs: (graph shows relatively evenly spread but concentrated job gains/losses in big cities huge expansion in jobs; pretty variegated localized patterns) Now just a mechanism for outsorucing (even if not offshoring) Increased role of agglomeration (localization and urbanization) economies in core economies. Silicon valley; localization valley--locating close to people who do similar things to you (same industries) lots of advantage. Big cities provide for urbanization economies services that small cities cannot support (e. g. banking sector, etc)--> work intimately with businesses within that sector: aglomeration economies, local suppliers/specialized services, can"t find them anywhere else, local specialized labor pools. Lifestyle preference (want to live in san francisco rather than north dakota) Learning from other firms, what to do and what not to do: trust and collaboration from face-to-face interaction. Following the buzz (gossip) about other businesses: regional motors, the matrix of transport/communication costs vs. agglomeration economies, six scenarios.
