Regional Economic Development

Origins
Regional economics has shared many traditions with regional science, whose earlier
development was propelled by Walter Isard and some economists' dissatisfaction with
the existing regional economic analysis. Despite such a rather critical view of regional
economics, however, it is hard to be denied that the "economic" approach to regional
problems was and has been the most significant one throughout the development
of regional science. As a sub-discipline of economics, it has also developed its
independent traditions and approaches that conform with the subject matter or
perspective of economics.
Location theory, that had been separately developed in Germany and North
America in the early 20th century, and the theory of external economies from
"localized industries" (as described in Alfred Marshall's Principles of
Economics (1890)) formed the theoretical basis of regional economics, which has
played a central role in regional science. As the preface and the contents of August
Lösch's Die räumliche Ordnung der Wirtschaft (Jena: Gustav Fischer, 1940; 2nd ed.,
1944), whose English translation was made in 1954 by W. H. Woglom under the title
of The Economics of Location, consistently showed, economic approach to (industrial
and consumer) locations has been central in both regional economics and regional
science. Harold Hotelling's spatial approach to economic competition, which was
introduced in The Economic Journal in 1929 under the title of "Stability in
Competition," and Edgar M. Hoover's Location Theory and the Shoe and Leather
Industries (1937) and The Location of Economic Activity (1948) were United
States scholars' representative contribution to theorizing and empirically verifying the
regional problems from the viewpoint of economics. In his seminal paper, "Increasing
Returns and Economic Geography," Journal of Political Economy, Paul
Krugman (1991: 498) emphasized the importance of economic geography and
regional economics for enriching economics concluding it with his statement of
scholarly hope as follows: "Thus I hope that this paper will be a stimulus to a revival
of research into regional economics and economic geography."

Definition
Vinod Dubey (1964) summarized the following four approaches to define regional
economics. The first approach is "to deny the possibility of isolating such a
discipline." According to Vinod Dubey (1964), Harvey Stephen Perloff, who co-
authored State and Local Finance in the National Economy (with Alvin Harvey
Hansen) and Regions, Resources, and Economic Growth (with Edgar S. Dunn, Jr.,
Eric E. Lampard, and Richard F. Muth), denied the possibility for any break-up of
regional studies or regional science into "parts parallel to the disciplines employed."
The second approach is to conform with the definition of Lionel Charles
Robbins (1932: 15), stated as "Economics is the science which studies human
behaviour as a relationship between ends and scarce means which have alternative

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uses," for the economic problems occurring in regions. The third approach is to define
regional economics as a sub-discipline of economics that addresses spatial general
equilibrium. This approach was emphasized by L. Lefeber and H. O. Nourse. The
fourth approach is to define it as a sub-discipline of economics that addresses
immobile resources. This view was supported by G. H. Borts (1960), J. L. Stein
(1961), and J. R. Meyer (1963).

In his Regional Economic Growth (1969), Horst Siebert viewed regional economics
as the study of humans' economic behavior in space. Drawing from the definition of
regional economics as the system of the scholarly answers to the question "What is
where, and why--and so what?" in An Introduction to Regional Economics (New York:
Alfred A. Knopf, 1971; 3rd ed., 1984) by Edgar M. Hoover and Frank Giarratanai,
and from Dubey's (1964: 29) definition of regional economics as "the study of
differentiation and interrelationships of areas in a universe of unevenly distributed and
imperfectly mobile resources with particular emphasis in application on the planning
of the social overhead capital investments to mitigate the social problems by these
circumstances," it is definable as the study of the systems of how (much) and where to
produce and redistribute what using scarce resources or public goods.

Meaning of Regional Economic Development

Regional economics is a sub-discipline of economics and is often regarded as one of
the fields of the social sciences. It addresses the economic aspect of
the regional problems that are spatially analyzable so that theoretical
or policy implications can be the derived with respect to regions whose geographical
scope ranges from local to global areas.

It is the process of economic development of a region through which a region is

capable to improve its economic, political, and social welfare. Nowadays in the
regional science this term is often used by the academician, policy-makers and
regional development agency people to indicate the growth of a region.

Concept of regional economics

Regional Economics refer to the economic advantage of a geographical location and
human activities of greatest height to contribute maximally to the general growth and
prosperity of the region. It involves analyzing economic, social, and institutional
factors that influence activities clustering in specific regions, leading to regional
inequalities and the development of strategies to enhance regional competitiveness.

There are four main types of regional economic integration:

i. Free trade area

ii. Customs union
iii. Common market
iv. Economic union

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Theory of Regional Economic Development
According to the product life-cycle theory of regional development, regions can
change their roles over time. As production concentrates in lagging regions, human
capital accumulation through learning by doing, personnel mobility, the development
of local linkages and other external economies can build up there.

Father of Regional Economics

Walter Isard, an economist who founded the field of regional science, inspiring social
scientists to study the relationships between such factors as geography, migration and
land use in local or regional economies, died on Saturday at his home in Drexel Hill,
Pa.
Regional Economies Examples
The following are examples of Regional Economic Integration: NAFTA (North
American Free Trade Agreement)-An agreement among the U.S.A., Canada, and
Mexico. EU (European Union)-A trade agreement with 15 European countries.

Economic Regions
The eight U.S. economic regions defined by the Department of Commerce Bureau of
Economic Analysis: New England, Mideast, Southeast, Great Lakes, Plains, Rocky
Mountains, Southwest, and Far West.
Indicators:

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Stages of Economic Integration
i. Preferential Trading Area ii. Free Trade Area iii. Customs Union
iv. Common Market v. Economic Union. vi. Monetary Union
vii. Economic Integration
Three economic systems
There are three main types of economic systems known as: a command economy, a
market economy and a mixed economy.
Positive and Negative Integration
Integration theories distinguish between “positive” and “negative” integration.
Positive integration is where common rules are provided by a higher authority to iron
out regional and other inequalities. Negative integration refers to barriers between
countries being removed.
Three Economic Groups
Producers - people/firms that produce goods or supply services. Consumers -
people/firms who purchase the goods/services. Governments - establishes rules for
economies.
A special economic zone (SEZ) is an area in which the business and trade laws are
different from the rest of the country. SEZs are located within a country's national
borders, and their aims include increasing trade balance, employment, increased
investment, job creation and effective administration. To encourage businesses to set
up in the zone, financial policies are introduced. These policies typically encompass
investing, taxation, trading, quotas, customs and labour regulations. Additionally,
companies may be offered tax holidays, where upon establishing themselves in a zone,
they are granted a period of lower taxation.The creation of special economic zones by
the host country may be motivated by the desire to attract foreign direct
investment (FDI). The benefits a company gains by being in a special economic zone
may mean that it can produce and trade goods at a lower price, aimed at being
globally competitive. In some countries, the zones have been criticized for being little
more than labor camps, with workers denied fundamental labor rights.

Three Economic Zones

Free-trade zones (FTZ)
An area within which goods may be landed, handled, manufactured or reconfigured,
and reexported without the intervention of the customs authorities.
Export processing zones (EPZ)
An Export Processing Zone (EPZ) is a Customs area where one is allowed to import
plant, machinery, equipment and material for the manufacture of export goods under
security, without payment of duty.
Free economic zones (FZ/ FEZ)
The term is used to designate areas in which companies are taxed very lightly or not at
all to encourage economic activity.