Section outline

  • Location Theory – Introduction. Location of Agricultural Activities

    Location theory is the basis for examining how and why the arrangement of cities and markets has come to be and provides the rationale for siting decision making and service allocation. The primary theoretical developments have focused on land use, industrial production, central places, and spatial competition. This theory supports various forms of locational analysis and highlights the significance of spatial proximity (Murray, 2009).

    Location theory implies the concept of location:

    - Absolute location (coordinate system).

    - Relative location (referring to other locations)

    Location theory focuses on the analysis of location decisions of firms and individuals and looks for a formulation of rules of behavior.

    In particular it helps answering the questions:

    1) What locates where?

    2) Why firms (or individuals) decide to locate in a certain place?

    Location theory makes use of models and simplified assumptions regarding the real world.

    Models become necessary as reality is complex. A Model is an idealized representation of the real world, built to present some properties (in particular related to social and economic phenomena).

    In Economic theory, models do not consider space (i.e., the market is a-spatial)

    In Geography (and Economic Geography in particular) space becomes a central element in the economic reasoning.

    Location theories are different and consider different human and economic sectors (agriculture, land use, industry, services, etc.).

    Different models share some starting points and hypotheses.

    1) Homogeneity and isotropy of space - no differences in morphology of space; no transport asymmetries; ecc.

    2) Fertility of land is homogeneous – if a rent exists, it depends on transport costs based on distance.

    3) Perfect competition - same price throughout the market; freedom of movements of factors of production; no transport costs.

    The father of location theory is renown as John Heinrich Von Thunen (Jever, Oldemburg – East Germany 1783 - 1850). In 1826 he wrote ‘The isolated state’ in which he stated that differences in the cost of producing agricultural products depended on the differences in land location and therefore on the distance of the producing areas to the market.

    Von Thunen’s theory opposed David Ricardo’s one in which differences in the cost of producing agricultural products result from utilization of land of different quality.