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Document be much simpler, if even less realistic, to assume that the two factors of production are both ''labor": mobile "workers" who produce manufactured goods and immobile "farmers" who produce the agricultural good. Farming is an activity that takes place under constant returns to scale; thus the farm labor used in producing any given quantity of the agricultural good at location j can, by choice of units, be set equal to production: 0095-01.gif Manufacturing, however, we assume to involve economies of scale, with a fixed cost for any variety produced at any given location: 0095-02.gif Let L A and L M represent the economywide supplies of the two factors "farmers" and "workers" Page 95 respectively. We will assume that these supplies are fixed. They are, however, allocated across locations. A share Φ j of the farm labor force is in location j; we take these shares as exogenous. At any point in time, a share λ j of the manufacturing labor force is also in location j; these shares will evolve over time in a fashion specified below. At any point in time, then, there will be location-by-location full employment equations for both factors/ sectors: 0095-03.gif 0095-04.gif Next we introduce transportation costs. For simplicity, we make some completely unrealistic assumptions about these costs. First, we assume that they apply only to manufactured goods. Second, we assume that they take the file:///D|/Export2/www.netlibrary.com/nlreader/nlreader.dll@bookid=409&filename=page_95.html [4/18/2007 10:30:45 AM]
Document Page 96 "iceberg" form introduced by Paul Samuelson: instead of modeling a separate transportation industry, we simply assume that a fraction of any manufactured good shipped melts away en route. Specifically, let x be the amount of some good shipped from j to k, and let z be the amount that arrives; then we assume 0096-01.gif where τ is the transportation cost and D jk is the distance between the two locations. Finally, we turn to factor mobility. Farmers are assumed completely immobile. Workers are assumed to move toward locations that offer them higher real wages. (No attempt is made here to model the moving decision explicitly.) As we will see in the next section, it is possible to solve the model at any point in time for the real wages ω j paid to workers at each location. Let us define the average real wage as 0096-02.gif Then the assumed law of motion of the economy is 0096-03.gif That is, workers move away from locations with below-average real wages and toward sites with aboveaverage real wages. We have now specified a complete model of geographic dynamics. The inputs into this model are the parameters µ, τ, and σ (which turn out to be the only parameters that cannot be eliminated by choice of units); a given allocation of farm labor across locations; a matrix of distances between file:///D|/Export2/www.netlibrary.com/nlreader/nlreader.dll@bookid=409&filename=page_96.html [4/18/2007 10:30:45 AM]
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Document Fourth printing, 1998 Firs
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Document Preface Page vii This book
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Document 2 Geography Lost and Found
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Page 95 and 96: Document The Basic Approach Page 90
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