INFORMATION TO USERS

This material was produced from a microfilm copy of the original document. While
the most advanced technological means to photograph and reproduce this document
have been used, the quality is heavily dependent upon the quality of the original
submitted.
The following explanation of techniques is provided to help you understand
markings or patterns which may appear on this reproduction.
1.T he sign or "target" for pages apparently lacking from the document
photographed is "Missing Page(s)". If it was possible to obtain the missing
page(s) or section, they are spliced into the film along with adjacent pages.
This may have necessitated cutting thru an image and duplicating adjacent
pages to insure you complete continuity.
2. When an image on the film is obliterated with a large round black mark, it
is an indication that the photographer suspected that the copy may have
moved during exposure and thus cause a blurred image. You will find a
good image of the page in the adjacent frame.
3. When a map, drawing or chart, etc., was part of the material being
photographed the photographer followed a definite method in
"sectioning" the material. It is customary to begin photoing at the upper
left hand corner of a large sheet and to continue photoing from left to
right in equal sections with a small overlap. If necessary, sectioning is
continued again — beginning below the first row and continuing on until
complete.
4. The majority of users indicate that the textual content is of greatest value,
however, a somewhat higher quality reproduction could be made from
"photographs" if essential to the understanding of the dissertation. Silver
prints of "photographs" may be ordered at additional charge by writing
the Order Department, giving the catalog number, title, author and
specific pages you wish reproduced.
5. PLEASE NOTE: Some pages may have indistinct print. Filmed as
received.

Xerox University Microfilms
300 North Zeeb Road
Ann Arbor, Michigan 48106

i

i

75 - 14,811

PROULX, Yvon, 1938THE LOCATION PATTERN OF THE LARGEST MANUFACTURING
CORPORATIONS AND ITS IMPACT ON RURAL AREAS
ECONOMIC GROWTH: A CASE ANALYSIS FOR THE
STATES OF MICHIGAN AND CALIFORNIA.
Michigan State University, Ph.D., 1974
Economics, agricultural

Xerox University Microfilms,

Ann Arbor, M ic h ig a n 48 1 0 6

TH E L O C A T I O N P A T T E R N OF T H E L A R G E S T M A N U F A C T U R I N G
C O R P O R A T I O N S AND ITS IMPACT O N RURAL A R E A S E C O N O M I C
GROWTH:

A C A S E A N A L Y S I S FOR T H E ST ATE S OF
MICHIGAN AND CALIFORNIA
By

Y v o r Proulx

A DISSERTATION
S u b m i t t e d to
M i c h i g a n State U n i v e r s i t y
in p artial ful f i l l m e n t of the re quirements
for the deg r e e of
D O C T O R OF PHIL O S O P H Y
De part men t o f A g r i c u l t u r a l Ec ono mic s
1974

ABSTRACT

T H E L O C A T I O N P ATTERN OF TH E L A R G E S T M A N U F A C T U R I N G
C O RPORATIONS A N D ITS IMPACT O N RU RAL A R E A S E C O N O M I C
GROWTH:

A CASE A N A L Y S I S FOR THE STATES OF
M I C H I G A N AND C A L I F O R N I A
By
Y v o n Pr oulx

Bet w e e n

19S0 and 1970,

the p o p u l a t i o n an d e c o nomic

activities of this country have been p r e d o m i n a n t l y se ttl ing
into the s u b urban ring of the large m e t r o p o l i t a n areas and
mov ing away from the n o n m e t r o p o l i t a n areas and the centr al
cities of the larg es t m e t r o p o l i t a n areas.

This s e t t l e m e n t

trend does not appe a r to be s o c ially accepted.

Pu blic s t a t e ­

ments a c c o m p a n y i n g the signing into law of a n e w l e g i s lation
on nonm etro de v e l o p m e n t

indic ate that there is an inc reased

d e t e r m i n a t i o n to promo te a mor e b a l a n c e d de m o g r a p h i c growth
and to s t r ength en econo mic o p p o r t u n i t i e s

in rural areas.

There are good reasons to bel ieve this is a j u s t i f i e d objective.
The n e w legislation,
incremental nature.

however,

seems to be of an

It strengthens n o n m e t r o p o l i t a n p r o g r a m

planni ng and co ordination,

broaden s

the d e f i n i t i o n o f rural

areas and p r o g r a m c o v e r a g e and expands

the funds available.

Y v o n Proulx
It does not change the ba sic a p p r o a c h w h i c h has be en f o l lowe d
thus far in this countr y and others but failed to b r i n g about
the d esired p o p ulatio n se ttlement and e cono m i c activ iti es
di s t r i b u t i o n patterns.
In this research,
which attempts

it is a r g u e d that

this approach,

to incre ase the att r a c t i v e n e s s

of rural and

depre s s e d areas throug h the financing of in f r a s t r u c t u r a l and
pro d u c t i o n facilities
to lo cate

and pr ovide s

in these areas,

ind uce men t

is a w e a k one.

for en te rprises

We argue that it

rests on an ina deq uat e theoretical u n d e r s t a n d i n g of the way
the current sett lem ent

and d i s t r i b u t i o n p a t t e r n s are generated.

A num b e r of theore tic al arguments,

m o s t l y d e r i v e d from a

rev ie w of location and area gr owth theories,

are d e v e l o p e d

to support the hy pothesis that the m o s t i mportant d e t e r m i n a n t
of area grow th d i f f e rentials is the cho i c e of lo cations of
the lar gest m a n u f a c t u r i n g corporations.

S p e c i f i c a l l y we

argue that this choice is r e l a t i v e l y free w i t h resp ect both
to the tradi tio nal loca tio n factors and the type of public
programs desire d from them.

It is also s uggested that the

largest m a n u f a c t u r i n g firms are in a p r i v i l e g e d p o s i t i o n to
act as

location leaders or to set the p a t t e r n of the spatial

d i s t r i b u t i o n of p o p u l a t i o n and econo mic activities.
The empirical part of the r e s e a r c h starts w i t h a
descriptive analys is of the geo g r a p h i c d i s t r i b u t i o n of the
emplo yme nt of the largest m a n u f a c t u r i n g c o rporations and its

Y v o n Pr oulx
relation to area gr owth in M i c h i g a n an d C a l i f o r n i a b e t w e e n
1960 and 1970.
The two states are di v i d e d into m u l t i - c o u n t y areas
defined as Ba sic Trading Areas

(BTAs)

and al r e a d y used in

an ERS study of the region al v a r i a t i o n s
The firms

included

200 largest

in econ omi c growth.

in the analysis are the Fort une M a g a z i n e 1s

industrial

co rporations plus

the 30 of the next

300 largest w h i c h had their h e a d q u a r t e r s

in ei th er M i c h i g a n

or C a l i f o r n i a

in 1970.

T he ir em p l o y m e n t figures are taken

from the Sales M a nagement Direc t o r y of Key P l a n t s .
The d e s c r i p t i o n shows that the firms
very hi gh p r o p o r t i o n of their empl o y m e n t
an SMSA,

inc lud ed have a

in BTAs

incl udi ng

that they increase their em ployme nt m o s t l y in these

areas and that the p o p u l a t i o n and total emp l o y m e n t of an
area fo llo w qu ite cl os ely the cha nge in the empl o y m e n t of
these firms.
We pro c e e d then to a r e g r e s s i o n analysis

in w h i c h we

attempt to expl ain the v a r i a b i l i t y of a depen d e n t v a r ia ble
d efined as the co m p a r a t i v e gain in e m p loyment of an area
b etween 1960 and 1970 by the chan g e

in emp l o y m e n t of the

firms i n c luded du rin g the p e r i o d and a n u m b e r of other v a r i ­
ables b e l i e v e d to influenc e the gr owth of an area.
results st rongly supp ort our hyp o t h e s i s

The

since m o r e than 90

percent of the v a r i a b i l i t y of the d epende nt v a r iabl e is
explained by the m odel and the v a r i a b l e m e a s u r i n g the change
in the acti vit ies

of the largest firms has,

largest beta weight.

by far,

the

Yv on Pr oulx
A l t h o u g h some w e a k n e s s e s

of the analysis and the

nature o f the m e t h o d o l o g y u s e d p r e v e n t us fr om con c l u d i n g
ca t e g orically that the hypo t h e s i s

is valid,

that the wei g h t o f the evi den ce suppor ts

this conclusion.

The m a j o r im p l i c a t i o n of the analysis
really w a n t to en h a n c e rural areas

it is b e l i e v e d

is that,

e c o nomic growth,

if we

pu blic

policy will have to deal w i t h the cho ice of the l o c a t i o n of
exp ansion for the largest m a n u f a c t u r i n g co rpor ations.
in turn,

This,

will requ ire mo re than incen tive s s u p p l i e d th r o u g h

the market.

Pu bli c poli c y will h a v e to leave to the largest

firms no altern a t i v e s other than to a l ign their loc at ion
patterns w i t h the pu bl ic

interest.

PRE FACE

In the pro ces s of p r e p a r i n g a term paper on the
quest i o n of rural c o m m u n i t y develop men t,

I came across

an

art icle by Prof e s s o r Charles Ti e b o u t w h i c h gave rise to
the idea i n v e s t i g a t e d in this thesis.

The article reports

one re su lt of res earch c o n d u c t e d by Del ano at the Univ e r s i t y
of W a s h i n g t o n in di ca ting that,

in the r e d e v e l o p m e n t county

of Y a k i m a du ri ng the p e r i o d u n d e r study,
plant o f m a n u f a c t u r i n g firms

no new br anch

l ocat ed in the area,

while

over 30 n ew bus i nesses

starte d up loca lly

Tie bout

some of them have since fa iled and

indicates that

others may rem ain small.

N e ve rtheless he ex presses

view that "here is, perhaps,
the future."

[Tiebout,

In other words,

that area's

1965].

the

real hope for

the de v e l o p m e n t po te ntial of

an area lies wit h i n the community,

in the hands o f local

people w i l l i n g and enc o u r a g e d to start a n e w business.
At this time,

I ha d just taken a cour se on in dustrial

o r g a n i z a t i o n and read Ada m's book on the S t r u c t u r e of
A m e r i c a n Industry w hich disc uss es
and mar k e t c o n c e n t r a t i o n
and competition,

barriers

the problem s of global

in the A m e r i c a n economy,
to entry,

etc.

[Adams,

It was not dif ficu lt for me to u n d e r s t a n d that

monopoly
1961].

some of

Yak ima 's n e w bus ines ses had fa ile d and others w o u l d remain

small.

It was mo re diff i c u l t to imagine a v e r y bri ght

future for r e d e v e l o p m e n t areas,
economic activities,

if,

all c o m p e t i n g for m o r e

to g e n erate this activity,

had to rely only on that sh are of n e w capital
not c o n t r o l l e d by the largest
This

they

in vestment

firms.

led me furth er to w o n d e r why the lar gest firms

might not be a t t r a c t e d to ru ral and d e p r e s s e d areas,
not re sp ond to publ i c
upside down,

incent ive to do so.

mig ht

T u r n i n g the coin

I w o n d e r e d if the l o c a t i o n p a t t e r n of these

firms m i g h t not be an impo rtant det e r m i n a n t of the existen ce
of d e p r e s s e d areas on one h a n d and extre m e l y large m e t r o ­
pol i t a n areas o n the other.
both rural and u r b a n areas,

I wondered

if the proble ms of

g e n e r a l l y d i s c u s s e d in two

separate segments of the li terature, might not be two
aspects of the same global set t l e m e n t problem.
This

thesis attempts to con t r i b u t e elements of an

answer to some of these questions.
gates

It e s p e c i a l l y i n v e s t i ­

the s i g nificance of the c o n t r i b u t i o n of the largest

m a n u f a c t u r i n g c o r p o r a t i o n s to ar ea d i f f e r e n t i a l s
growth,
alter

in econo mic

in an attempt to iden tif y a stron g e r p o l i c y tool to

in favor of rural areas the curre nt gro w t h and

set tlem ent trends.
The first chapt er disc usses

the nature of the s e t t l e ­

ment p r o b l e m w h i c h m o t i v a t e d this work;

it sugges ts a need

for fu r t h e r rese arc h on the q u e s t i o n and elab ora tes the
hy pot hesis and ob jectives

of the research.

T h e seco nd

chapter attempts

to support the h y p o t h e s i s

a theor eti cal base.

Th e t h ird p r e sents

designed to test this hypothesis.
reports a n d di scusses

f o r m u l a t e d with

the m e t h o d o l o g y

The fourth chapt er

the findings of the r e s e a r c h and the

fifth and final c h a p t e r draws

some p o l i c y implica tio ns

from

the findings.
The auth or w i s h e s to express his a p p r e c i a t i o n to the
members of his Guidance Committee:
Dr.

D. E.

Chappelle,

Shaffer a n d Dr. A.

Y.

Dr.

Dr.

J. T.

L. V. Mandersch eid,

C. Koo

Bonnen,
Dr.

J. D.

for th eir assi s t a n c e during

his gradu ate p r o g r a m at M i c h i g a n St ate University.
Spe c i a l thanks are g i ven to the first

four of these

persons w h o also serv ed on the Thesis Committee.
Bonnen's e n couragement,

assistance,

Dr.

advice and the m a n y

hours spent b r u s h i n g - u p the au thor's En g l i s h and Dr.
M a n d e r s c h e i d 1s commen ts

and suggestions on the st ati stical

part of the resea r c h w e r e esp e c i a l l y helpful.
A p p r e c i a t i o n is e x t e n d e d to the Cons eil des Recherch es
Agricoles

d u Quebec,

the Conseil des Arts du Cana da and

Laval U n i v e r s i t y for their fi nancial a s s i s t a n c e dur i n g the
author's g r a d u a t e

studies.

The auth or is also inde bte d to his wife,

Lise,

for

her as sistance and c o m p r e h e n s i o n t hr o u g h o u t hi s u n d e r g r a d u a t e
and g r a dua te studies.
Any

error or omissions

found in this m a n u s c r i p t

solely the r e s p o n s i b i l i t y of the author.

are

TABLE OF CONTE N T S

Chapt er
I

Page
THE PROBLEM, JUS T I F I C A T I O N , H Y P O T H E S I S
A N D O B J ECTIVES O F THE R E S E A R C H ............

1

The P r o b l e m ...............................

1

P o pulation Set t l e m e n t and E c o n o m i c
Act i v i t i e s D i s t r i b u t i o n Patterns. .
.
An U n b a l a n c e d S e t t l e m e n t Pattern:
The Probl ems of U rban and Rural Area.
A More Per sonal Stateme nt of the
Aut hor on the S e t t l e m e n t Problem. .
.
The
the
The
The
II

Need for Fu r t h e r R e s e a r c h on
Q u e s t i o n ..........................
B a sic Hyp o t h e s i s of the Research.
Obj e ctives of the R e s e a r c h ....

A T H E O R E T I C A L B ASE TO SU P P O R T THE
H Y P O T H E S I S FOR M U L A T E D .....................
Locat i o n Theor ies and the Spatial
D i s t r i b u t i o n of Ec onomic A c t i v i t i e s
The Lo cation P attern of the Largest
M a n u f a c t u r i n g C o r p o r a t i o n s .........
The La rge M a n u f a c t u r i n g C o r p o r a t i o n
and A r e a G r o w t h .....................

III

27
.
31

M E T H O D O L O G Y ............................

.

10
21

28

32
.

33

50
62
73

The D e l i n e a t i o n of A r e a s ...........
73
U rban and Rural O r i e n t a t i o n of
the A r e a s ............................
77
The M e a s u r e m e n t of A r e a Gr owth
D iff e r e n t i a l s .............................
The Ec o n o m e t r i c Test of S i g n i f i c a n c e
of the Hyp o t h e s i s I n v e s t i g a t e d ....
84
The General F u n c t i o n to be Estimated.
The Diff e r e n t Functi onal Forms. . . .
The E s t i m a t i o n Pr ocedur es ............
The St ates S e l e c t e d for the Case
A n a l y s i s ............................
94
The Data S o u r c e s ..................
95
v

1

81

84
89
93

Chapter
IV

Page
THE FINDI NGS OF THE R E S E A R C H ...............

105

The G e o g r a p h i c D i s t r i b u t i o n of the
Empl o y m e n t of the La rge M a n u f a c t u r i n g
Corporat ions and Its R e l a t i o n to Growth
in M i c h i g a n and C a l i f o r n i a ..........
105
The Results of the St a t i s t i c a l A n a l y s i s
109
The Linear F u n c t i o n s ..............
Basic T rading A r e a as a Unit
of O b s e r v a t i o n ...................
M o d i f i e d B a sic Tr a d i n g A r e a as
the Unit of O b s e r v a t i o n . . . . . .
The Co unty as the Unit of
O b s e r v a t i o n ......................
The Lo g a r i t h m i c Func tions
Inferences
V

109
123
126

..............

from the R e s u l t s .......

S UMMARY A N D C O N C L U S I O N S

109

138

....................

141

A Poli c y R e c o m m e n d a t i o n ...................
S ugg estions for F urther Research. . . .
A P P E N D I X ...........................................
BIBLIOGRAPHY

148
157

162

..............................................

vi

129

172

LIST OF TAB LES

Table
1

2

3

4

5

6

7
8

9

Page
P o p u l a t i o n an d P o p u l a t i o n Change in the
Unit ed States M e t r o p o l i t a n (SMSA) and
N o n m e t r o p o l i t a n Areas, 1950-1 970 . . . .

3

P o p u l a t i o n and P o p u l a t i o n Ch ange by Size
Class of SMSAs in the Unit ed States,
1 9 5 0 - 1 9 7 0 ....................................

4

Components of P o p u l a t i o n Change in N o n ­
m e t r o p o l i t a n Areas, Inside and O utside
the Cen tra l City of M e t r o p o l i t a n Areas,
by Size Classes of M e t r o p o l i t a n Areas,
Uni t e d States, 1960 - 1 9 7 0 .................

6

Total Pe rsonal Income, W h ere Earned, in
the Uni t e d States, M e t r o p o l i t a n and N o n ­
m e t r o p o l i t a n A r eas and for the La rgest
M e t r o p o l i t a n Areas, 1 9 5 0 - 1 9 7 0 ............

8

P e r c e n t a g e U r ba n and Rural Population,
Land A r e a and P o p u l a t i o n De n s i t y in the
Uni ted States, M e t r o p o l i t a n and N o n ­
m e t r o p o l i t a n Areas, 1970 .................

11

S e l e c t e d Social and Eco no mic C h a r a c t e r ­
istics of P o p u l a t i o n Groups in the
Uni t e d States, 1 9 7 0 ..............

14

Cr ime Rates by P o p u l a t i o n Groups in the
Uni ted States, 1 9 7 0 ........................

15

N u m b e r of Cities w i t h a S u s p e n d e d
Pa r t i c u l a t e M a t t e r Level H i g h e r
than 76 M i c r o g r a m s per Cubic Meter, by
Po p u l a t i o n Groups, Unit e d States, 1970

15

Per c e n t a g e of the V alu e A d d e d by M a n u ­
fact u r i n g and the P e r c e n t a g e of Total
M a n u f a c t u r i n g Ass e t s O w n e d by the 200
Largest M a n u f a c t u r i n g Co rporations,
Uni t e d States, S e l e c t e d Y e a r s ............
vii

.

29

Page

Table

10

11

12

13

P e r c e n t a g e of Rural Popu l a t i o n and P e r ­
centag e of the P o p u l a t i o n Living in R u r a l O r i e n t e d Basic Tra d i n g Areas w i t h A l t e r n a ­
tive C r i t e r i a Used to Def i n e the Rural
Orien tat ion , M i c h i g a n and Califor nia , 1970

80

A p p r o x i m a t e S t a ndard Error of Esti m a t e d
Num ber of Employed B a sed on 20 Perc ent
Samp l e .........................................

97

A p p r o x i m a t e S t a n d a r d Error of Esti m a t e d
Pe r centage Employed, B a sed on a 20 Percent
Sam ple .........................................

99

Total Emp l o y m e n t an d A v e r a g e An nua l Rate
of Ch a n g e A c c o r d i n g to A l t e r n a t i v e Sour ces
of Information, Michigan, C a l i f o r n i a and
S e l e c t e d Areas and Counties, 1959, 1960
and 1970 ......................................

99

14

N um b e r of Em plo yees of the Lar gest C o r p o r ­
ations in Est a b l i s h m e n t s w i t h 500 or
More Emplo y e e s and Num b e r o f Such E s t a b l i s h
ments in S e l e c t e d Groups of Areas, M i c h i g a n
107
and California, 1960 and 1 9 7 0 ..............

15

Population, Total Emp l o y m e n t and Total
M a n u f a c t u r i n g E m p loyment in Selec t e d
Groups of Areas, M i c h i g a n and California,
1960 and 1 9 7 0 .................................

108

16

P e r centage Cha nge of Po pulation, Total
Employment, Tota l M a n u f a c t u r i n g E m p l o y m e n t
and Em ploy ment of the Largest Co rporations
Be t w e e n 1960 and 1970 and E m p l o y m e n t of the
Largest C o rporations as Percent o f Total
E m ployment and Total M a n u f a c t u r i n g E m p l o y ­
ment in S e l e c t e d Groups of Areas, M i c h i g a n
110
and C a l i f o r n i a ...............................

17

C o r r e l a t i o n M a t r i x of the V ariables
Included in the Reg res sio ns w i t h the Basic
Tr a d i n g Ar ea as Unit of Ob servation,
M i c h i g a n and C a l i f o r n i a .....................

18

111

R e g r e s s i o n Sta t istics for the Function X, =
f ( X 7 ,. . . ,X,n), Unit of Observat ion :
113
BTA, M i c h i g a n and C a l i f o r n i a ..............
viii

Page

Table
19

20

R e g r e s s i o n Statistics for the Fu nctio n
X,-, « f ( X ? ,. . . ,Xi n ), Un i t o f O b s e r v a ­
tion:
BTA, M i c h i g a n and California. . . .

118

R e g r e s s i o n Statistics for the Fu nctio n
= f ( X 3 > . . . ,X1 0 ,X1 2 D, Unit of

X 1±

Ob serv ati on:
BTA, M i c h i g a n and
C a l i f o r n i a ....................................
21

22

23

R e g r e s s i o n Statis tic s for the Fu nction
X 11 " CX2 *1.196) = f CX 2 ,. . . ,X1 Q ), Unit
of Observation:
BTA, M i c h i g a n and
C ali f o r n i a ....................................

122

Co r r e l a t i o n M a t r i x of the Varia b l e s
Included in the Re g r e s s i o n s w i t h the
M o d i f i e d BTA as Unit o f Ob servation,
M i c h i g a n and C a l i f o r n i a .....................

124

R e g r e s s i o n Statistics for the F u n c t i o n
X^ = f ( X 2 ,. . . ,X1 Q ) , Unit of Observa tio n:
M o d i f i e d BTA, M i c h i g a n and California.

24

M i c h i g a n and Ca lifornia.

28

29

. .

.........................................

127

128

R e g r e s s i o n Sta t i s t i c s for t h e .Function:
lnX a = f ( l n X 2 , l n X 3 , X 4 , X £ , l n X fi, X y , X g ,
. . . .

130

Lo g a r i t h m i c and N o n l o g a r i t h m i c O b s e r v a t i o n
for V a r i a b l e s X, an d X_ in S e l e c t e d BTAs
and M o d i f i e d BTAs. .
......................

132

L o g a r i t h m i c O b servations for T r a n s f o r m e d
Varia b l e s X 1 and X, in S e l e c t e d BTAs and
M o d i f i e d BTAs. .
..........................

135

l n X g , X 10) M i c h i g a n and C a l i f o r n i a

27

125

Re g r e s s i o n Statistics for the Fun ction
X^ = f ( X 2 ,. . .,X1 0 ), Unit of O bserv ati on:
Count y

26

. .

R e g r e s s i o n Sta tistics for the F u n c t i o n
X ^ = f [ X 2 ,. . . ,X1(J) , Unit of O b s e r v a t i o n
M o d i f i e d BTA,

25

120

R egr e s s i o n Stati sti cs for the F u n c t i o n
lnX1 = f(lnX2 , lnX3 , X $ , X ? , X g , X Q , X 1Q)
M i c h i g a n and C a l i f o r n i a .....................

ix

136

Page

Table
30

R e g r e s s i o n Statistics

for the F u n c t i o n

X 11 " X 2/ X 2 = £ C X Z» W
X 5 ’ X8 * X 9 * X 1 Q ^
O b s e r v a t i o n for Larger ‘Counties Only,
M i c h i g a n an d C a l i f o r n i a .....................

137

Appe ndi x
S e l e c t e d Var iab les for Counties and
Basic T rading Areas, M i c h i g a n and
California, S e l e c t e d Y e a r s ..................... 162
List of Firms' Names Inclu ded in the
A n a l y s i s .......................................... 167
R e g r e s s i o n Statistics for the F u n c t i o n
X^ = f ( X 2 ,- . .,X^g), Unit of Observation:
BTA,

De troit A r e a D r o p p e d ..................... 170

Regr e s s i o n Sta t i s t i c s for the F u n c t i o n
X^ = f ( X 2 , . . . ,X1 Q ) , Unit of Observation:
BTA, Detroit,
O a k l a n d Areas

Los An g e l e s and Sa n FranciscoDrop ped ........................ 171

x

LIST OF FIG URE S

Figure

Page

1

Hypot h e t i c a l Econom ies of S c ale with
Urban S i z e ...................................... 40

2

H y p o t h e s i z e d Social and P ri v a t e Cost
of Prod ucing One Dolla r' s W o r t h of
Goods and Servic es with Ci ty S i z e ............ 47

3

C r i teria for Group i n g C o u nti es by
Ur ban O r i e n t a t i o n ............................... 78

CHAPTER I

THE PROBLEM,

JUSTIFIC A T I O N ,

HYPOTHESIS

A N D O B J E C T I V E S OF TH E R E S EAR CH

The P r o b l e m
In his p r e s i d e n t i a l addr ess

at the 1973 annu al m e e t i n g

of the A m e r i c a n A g r i c u l t u r a l E conomics Asso ci a t i o n ,

K enneth

T e f e r tiller invites us to e xamine the p r o b l e m of rural d e v e l o p ­
ment in a b road perspective.
dev elo pment p o l i c y has

He sugg est s that "a rural

to add re ss

it sel f to the bas ic

questions of w h ere p e o p l e are go ing to live and w o r k
future and u nder what cond iti ons "
This,

we believe,

[Tefertiller,

is correct.

Thus,

to indicate wh at this r e s e a r c h attempts
rural dev elo pment policy, we wi ll
have lived in the past,
them and what probl em s

wher e

in the

1973].

bef o r e p r o c e e d i n g

to c o ntribu te to

first e xa mine w h e r e peo p le

the c u r r e n t

trends are leading

s e e m to be invol v e d in these

trends.

P o p u l a t i o n S e ttlement and Econo mic
A cti v i t i e s D i s t r i b u t i o n Patterns
B e t w e e n 1950 and 1970,
States

the p o p u l a t i o n of the U n i t e d

in cr eas ed by 51.8 m i l l i o n people.

percent of this

A p p r o x i m a t e l y 86

increase o c c u r r e d in areas d e s i g n a t e d as

1

2
Standard M e t r o p o l i t a n S t a t i s t i c a l Areas,

w hile the r e m a i n i n g

14 per cent of the p o p u l a t i o n i nc re ase was a dded to n o n ­
m e t r o p o l i t a n areas,

(see T a b l e 1).

The p o p u l a t i o n of this c o u n t r y is e x p e c t e d to grow
further.

If one takes the a vera ge o f the two extre me p o p u ­

lation pr o j e c t i o n s made by the Census B u r e a u as an ac curate
expectation,
inhabitants
Census,

the U.S.

p o p u l a t i o n by 1990 w o u l d be 253 m i l l i o n

or 50 m i l l i o n mo re than in 1970

1972].

A s s u m i n g that the SMSAs will

[U.S.

B u r e a u of

captu re 80

percent'*' (or a slightly smaller share than in the past)
this

increase,

people.

of

they w i l l have to a c c o m o d a t e 40 m i l l i o n mor e

T h e i r share of the total p o p u l a t i o n

be 71 p ercent as com pared to 62.5 in 1950

(Table 1).

A cl ose r look at the last two decades'
population in m e t r o p o l i t a n areas reveals

in 1990 w o u l d

grow th of

that the SMSAs havi ng

between 1 and 3 m i l l i o n inh abit ant s gr ew at the fastest rate.
In fact,

these 27 SMSAs plus

the 6 hav i n g 3 m i l l i o n

tants or m o r e ca ptured 58.4 per c e n t
SMSAs

(Table 2).

the two decades,

inhabi­

of the gro w t h of the

At this rate, w h i c h was

about the same for

they w o u l d have to locate 23 m i l l i o n more

people by 1990 w h ile the other 210 SMSAs w o u l d greet 17

*This is the p e r c e n t a g e u s e d by A n t h o n y Downs in
mak ing a similar p r o j e c t i o n b ased on a s o m ewhat smal ler
expected gro w t h for the total U.S. p o p u l a t i o n [Downs, 1970],
It seems just i f i e d since the gain has been sma ller in the
1960s than in the 1950s.

Table 1.

Population and Population Change in the United States, Metropolitan

Location

Population
1970

1960

(SMSA) and Nonmetropolitan Areas,

1950-1970*

Population Change
1950

1960-70

1950-60

—

1950-70

lin uuu s ) --------- -----------

United States

203,212

179,323

151,326

23,889

27,997

51,886

SMSA

139,419

119,595

94,579

19,824

25,016

44,840

63,797

59,947

53,696

3, 850

6,251

10,101

75,622

59,648

40,883

15,974

18,765

34,739

63,793

59,728

56,747

4,065

2,981

7,046

Central City
Outside Central City
Nonmetropolitan

(Percentage Dist ribution)
United States

Percent
Change

Percent of
U.S. Change

Percent
Change

100.0

100.0

100.0

13.3

100.0

18.5

68.6

66.7

62. 5

16.6

83.0

Central City

31.4

33.4

35. 5

6.4

16.1

Outside Central City

37.2

53. 3

27.0

26.8

31.4

33.3

37.5

6.8

SMSA

Nonmetropolitan

Percent of
U.S. Change

Percent
Change

Percent of
U.S. Change

100.0

34.3

26.4

89.4

47.4

86.4

11.6

22.3

18.8

19.5

66.9

45.9

67.1

85.0

66.9

17.0

5.3

10.6

12.4

13.6

100.0

^Figures relate to areas as defined for 1970 (243 SM5As).
Source:

U.S. Bureau of the Census, U.S. Census of Population:
United States Summary, Washington, D.C., 19/1.

1970, Number of Inhabitants, Final Report, PC(1)-A1,

Table 2.

Population and Population Change by Site Class of SMSAs in the United States, 1950-1970.*

Size of SMSA

# of
Areas

Population

1370

1960

1330

Population Change
1950-60

1960-70

1950-70

3j

3,000 or more
1,000 to 3,000

6
27

500 to 1,000
250 to 500

32

100 to 250
Less than 100

92
26

60

37,710

33,708

27,709

4,002

5,999

10,001

42,946

35,362
18,588

26.75S
14,424

7,584

8,607

16,191
7,512

13,364

14,973

16,992
13,081

2,091

1,862

21,936
19,761

3,348

4,164

10,736

2,769
1,892

3,628
2,345

1,531

229

331

(Percent Distribut ion)

3,000,000 or more
1,000,000 to 3,000,000
500,000 to 1,000,000
250,000 to 500,000
100,000 to 250,000
Less than 100,000

Percent
Change

Percent
of SMSAs
Change

6,397
4,237
560

Percent
Change

Percent
of SMSAs
Change

Percent
Change

Percent
of SMSAs
Change

21.7

22.3
36.1
16.7

27.0
30.8

28.2
29.6

29.3
28.3

11.9
21.4

20.2
38.3

32.2

23.9
34.3

15.7

15.5

15.3

18.0

16.9

28.9

16.6

36.1
60.5
52.1

14.2 '
10.7

14.2
10.9

14.1
11.4

16.3
14.5

14.0
9.5

27.1
21.8

14.5
9.4

47.9
39.5

14.2
9.4

1.6

1.6

12.3

1.2

21.6

1.3

36.6

1.2

1.5

•Figures relate to areas as defined for 1970 (243 SMSAs).
Source: U.S. Bureau of the Census, U.S. Census of Population:
United States Summary, Washington, D.C., 1971.

1970, Number of Inhabitants, Final Report, PC[1)-A1,

5

m ill ion p e o p l e and the 14,557 small towns and vi llage s and
the c o u n t r y s i d e of the n o n m e t r o p o l i t a n areas w o u l d add only
about 10 m i l l i o n to their popul ati on.

This w o u l d b ring the

proportion of the total p o p u l a t i o n in these 33 largest SMSAs
to 41 perce nt from 36 per cent that was
The trends examined thus
whole picture.

in 1950.

2

far do not h o w e v e r reveal

the

It c o uld have been n o ted from the data

present ed above that the p o p u l a t i o n of the n o n m e t r o p o l i t a n
areas and of the central cities of the m e t r o p o l i t a n areas
has been gr owing at a much small er rate than the average
for the n a t i o n as a whole.

It suggests

have su ffered a ne gati ve net migra tion .

that these areas
This t rend is

documented in T able 3 w h i c h shows the c o m p o s i t i o n of the
po pul ation cha nge in the vario us types of areas of the
country.

It can be o b s e r v e d that the net m i g r a t i o n is

negat ive for bot h the n o n m e t r o p o l i t a n areas and the central
cities of the m e t r o p o l i t a n areas,

that the mo st im por tant

net o u t - m i g r a t i o n is from the central cities of the largest
SMSAs w h ile the largest net i n - m i g r a t i o n is into the s u b urban
ring of the largest SMSAs.

U sing the as sum ptions made here to p r o j e c t the
population, we have the fo llowing picture:
Population in
millions
United States
SMSAs
33 largest SMSAs
Other SMSAs
Nonmetropolitan areas

253
179
104
75
74

"

1990

Percentage Distribution
1950
1960
1990
1970
100."O' 1O0.0
100. f
62.5
68.6
70.8
66.7
38.5
36.1
39.7
41.1
26.4
29.6
28.2
28.9
37.5
31.4
33.3
29.2

mo

6
Table 3.

Components of Population Change in Nonmetropolitan Areas,
Inside and Outside the Central City of Metropolitan Areas,
By Size Classes of Metropolitan Areas, United States,
1960-1970.

Location

Total
Change

Natural
Increase

Net
Migration

-(in 000fs)...... .
Nonmetropolitan Areas
SMSAs1
Central City
Outside Central City

3,684
19,997
3,904
16,093

5,990
14,767
7,319
7,448

Size Classes of SMSA'*'
3,000,000 or more
Central City
Outside Central City

4,268
-20
4,288

1,000,000 to 3,000,000
Central City
Outside Central City

Rate of Change^
Natural Net
Migration
---- (Percent)-----

-2,306
5,230
-3,4153
8,6453

10.1
12.2
12.2
12.3

-3.9
+4.3
-S.73
14.33

3,892
1,649
2,243

376
-1,669
2,045

10.6
8.3
13.2

1.0
-8.4
12.0

7,437
848
6,589

4,179
1,766
2,413

3,258
-916
4,176

12.8
12.3
13.1

10.0
-6.4
22.7

500,000 to 1,000,000
Central City
Outside Central City

3,606
1,300
2,306

2,620
1,825
795

986
-522
1,511

12.7
17,2
8.0

4.8
-4.9
15.1

250,000 to 500,000
Central City
Outside Central City

2,802
811
1,991

2,226
1,034
1,192

576
-226
799

13.4
13.3
13.4

3.5
-2.9
9.0

100,000 to 250,000
Central City
Outside Central City

1,722
840
882

1,630
881
749

92
-40
133

13.6
14.0
13.2

0.8
-0.6
2.3

100,000 or Less
Central City
Outside Central City

162
125
37

220
166
54

-58.
-42
-17

14.6
15.1
13.3

-3.8
-3.8
-4.2

^SEAs are used in New England in place of SMSAs.
2
Percent of 1960 population.
^These figures include a substantial amount of change due to annexations
by central cities. Thus the net out-migration from the central cities
as well as the net in-migration into the suburban ring of SMSAs are
understated.
Source:

U.S. Bureau of the Census, 1970 Census of Population and Housing,
FHC(2)-1, General Demographic Trends for Metropolitan Areas, 1960
to 1970, Washington, D.C. , Tables 6, 11 and 11A and calculations.

7
Tu r n i n g br i e f l y n o w to the d i s t r i b u t i o n of economic
activities,

one does not expect very diffe r e n t trends

most p e o p l e have to w o r k close to wh ere they live.

since

This

expe ctation is c ertainly co nsistent w i t h the o b s e r v e d trends.
Meas uri ng the level and growth p attern of econo mic activi tie s
in var io us areas by the pers o n a l
generat ed in these areas,

income of the p o p u l a t i o n

we obs er ve that

similar to those of the p o p u l a t i o n
tion of the total perso nal
in SMSAs

the trends are very

(Table 4).

The d i s t r i b u ­

income is even mo re c o n c e n t r a t e d

than the p o p u l a t i o n is and this c o n c e n t r a t i o n is

incre asi ng but at a somewhat small er rate than population,
especially during the last decade.

The large st SMSAs are

cap turing an even lar ger share of the p er so nal
than they do for the po pulation,
increase was

tho ugh the share of the

sligh tly small er in the 1960s

It suggests a very m i l d relat ive

income incr ease

than in the 1950s.

impro vem ent of the income

situation of n o n m e t r o p o l i t a n areas during the last decade.
If the level and growth pa t t e r n of econo mic activ iti es
in these areas were m e a s u r e d wi th em ploymen t da ta

(which could

not be re ported here becaus e of the absenc e of p u b l i s h e d
emp loyment data for c o n s i s t e n t l y de f i n e d m e t r o p o l i t a n areas
thr oughout the period)

it is b e l i e v e d that the trends
3
exh ibi ted w o u l d be similar.
This is, however, in o p p osition

^Perloff, et al. [1963] e x a mined the shifts in p o p u l a ­
tion, employment and total persona l income be t w e e n States
for the peri o d 1939-54.
A look at their figures 10, 41 and
45 suggests that both measu r e s (employment and income) of

Table 4.

Total Personal Income, Where Earned, in the Uhited States, Metropolitan and Nonmetropolitan
Areas and for the Largest Metropolitan Areas, 1950-1970.

Location

Personal Income,
Where Earned
1970

1959

Change in Personal Income
1950

1959-70
f\n

United States
SMSAs
3,000,000 or more
1 to 3,000,000
Nonmetropolitan Areas

798,949
622,480
190,967
190,063
176,469

382,840
297,569
95,647
88,040
85,271

226,197
168,985
56,297
48,442
57,212

(Percent Distribution)

United States
SMSAs
3,000,000 or more
1 to 3,000,0001
Nonmetropolitan Areas

100.0
77.9
30.7
30.5
22.1

100.0
77.7
32.1
. 29.6
22.3

100.0
74.7
33.3
28.7
25.3

1950-59

1950-70

156,643
128,584
39,350
39,598
28,059

572,752
453,495
134,670
141,621
119,257

Tv.1-t

416,109
324,911
95,320
102,023
91,198
Percent
Change

Percent
of Total
Change

Percent
Change

Percent
of Total
Change

Percent
Change

Percent
of Total
Change

108.7
109.2
99.7
115.9
107.0

100.0
78.1
29.3
31.4
21.9

69.3
76.1
69.9
81.7
49.0

100.0
82.1
30.6
30.8
17.9

253.2
268.4
239.2
292.4
208.4

100.0
79.2
29.7
31.2
20.8

Percentage of total metropolitan income or change.
Source:

U.S. Department of Commerce, Bureau of Economic Analysis, Survey of Current Business, Vol. 52,
No. 5, May 1972, Part 1, page 30 and calculations.

9
with Edwards,

C olt ra ne and Da berkow's o b s e r v a t i o n s

period 1959-68

[Edwards,

Coltrane,

Daberkow,

1971,

for the
pp 52-55].

They found that e m p loyment du rin g the p e r i o d they covered
has inc reased by a slightl y gr e a t e r p e r c e n t a g e
o r i e n t e d counties w h i l e p o p u l a t i o n was
urban or iented counties.
Edwards,
their findings

et al.,

inc re asing mo r e

in

This needs some explanation.

supp lied several

e x p la nations for

and came close to su ggesting that there w o u l d

be "real job gains
population.

in rural

in rural areas" de s p i t e the dec r ease in

Unfortuna tel y,

it is very lik ely that they

mis s e d the m ost im por ta nt e x p l a n a t i o n for their finding.
Their m e a s u r e of employment
ment,

thus

is total n o n a g r i c u l t u r a l

ex clud ing a g r i c u l t u r a l

s u b s tantially over the per iod .^

e mpl o y m e n t w h i c h d e c r e a s e d
This type of employ ment

obv iously m u c h m o r e

important,

more

in rural o r i e n t e d counties.

in percen tag e,

employ­

in abs o lute terms

is

and even
Its omiss ion

has the ref ore c e r t a i n l y c o n t r i b u t e d im p o r t a n t l y to an o v e r ­
statement

in th eir analysis of the p e r c e n t a g e increase

in

the shift in economic activities a p p r o x i m a t e c l o s e l y the
shift in pop ulation.
Similarly, Fuchs has f o und a h i g h c o r ­
relat i o n be t w e e n these two m e a s u r e s of the shift in economi c
activ iti es for th e p e r i o d 1929-54 [Fuchs, 1962, p. 45].
4T h i s aut h o r has v e r i f i e d from the da ta of the Bureau
of L a bor Statist ics that duri ng the p e r i o d 1959-68, the total
no n a g r i c u l t u r a l em ployment has incre a s e d by 22.1 percent,
w h ile the total employment was incr e a s i n g by only 17.5 p e r ­
cent [U.S. D ep a r t m e n t of Labor, 1970-71].
We can easily
imagine the im portance of such a decrease in agri cultural
empl oym ent on the p e r c e n t a g e change in total employ men t in
rural areas.

10
employment

in rural o r i e n t e d count ies as co mpared to urb an

orient ed counties.
We concl u d e that the p o p u l a t i o n and econom ic ac tivities
of this country have b e e n p r e d o m i n a n t l y settlin g into the
large m e t r o p o l i t a n areas and m o v i n g away from the n o n m e t r o ­
p olitan areas and the cent ral cities of the largest m e t r o p o l i ­
tan areas.

This set tlem ent pa t t e r n is not n e c e s s a r i l y a

pr o b l e m in itself,

it ma y be a s y m p t o m of pro blem s or

con tr ibute to aggra v a t e p r o blems. ^

This

is what we mus t no w

look at.
An U n b a l a n c e d Sett l e m e n t Pattern:
The Problems of U rban and Rural Areas
Let us assume,

for the p u r p o s e of this section,

that

the d i s t i n c t i o n b e tween m e t r o p o l i t a n and n o n m e t r o p o l i t a n
areas

supplies a rea sonable a p p r o x i m a t i o n of the d i s t i n c ­

tion u r ban versus

rural areas.

This

is at least c o nsi stent

with the prop o r t i o n of the popu l a t i o n c l a s s i f i e d as urba n
and rural by the Census Bu rea u and the p o p u l a t i o n de n s i t y
in these areas

(Table 5).

T hese are the- c r i teria g enerally

used to d i s t i n g u i s h an u r ban from a rural area,
see in Cha pter III.

It is also s u g g e s t e d as con ceptual ly

a p p r o p r i a t e or used as such by ce r t a i n authors
p.

9 and 37, p.

125].

as we will

We can n ow infer,

[Downs,

1970,

from the observed

^Unless other w i s e specified the term se ttle ment patt ern
will n ow be used as a p r oxy for the d i s t r i b u t i o n of p o p u l a ­
tion and econ omi c growth.

11
comp osi tio n of the p o p u l a t i o n change,
away from the most

rural parts of the country and away f r o m

the most u r b a n parts of the country.
existence of severe problems

Table 5,

that p e o p l e are m o v i n g

This suggests

the

in both areas.

Percentage Urban and Rural Population, Land Area and Population
Density in the United States, Metropolitan and Nonmetropolitan
Areas, 1970.

Location

Urban

—

Rural

Land Area:
1,000 sq.
Miles

Density in
Persons Per
Sq. Mile

Percent---

United States

73.5

26.5

3,537

57.5

SMSAs

88.2

11.8

387

360.0

100.0

0.0

14

4,462.0

78.3

21.7

373

203.0

41.3

58.7

3,150

20.0

Central City
Outside Central City
Nonmetropolitan Areas
Source:

U.S. Bureau of the Census, U.S. Census of Population; 1970,
Number of Inhabitants, Final Report, PC(l)-Al, U.S. Summary,
Washington, D.C., Tables 2, 35, 41 and calculations.
The fact that there are probl ems m o t i v a t i n g peop le to

move away from rural areas

is r e l a t i v e l y well documented.

No c o m p r e h e n s i v e treatm ent of these proble ms

is a t t e m p t e d

here.

to sugg est w ith

We simply r ef er to a few p u blications

their authors that on very m a n y aspects of w e l l - b e i n g rural
people are in a d i s a d v a n t a g e d p o s i t i o n as c o m p a r e d to u r b a n
people.
Such is the case,
rural health,

to name a few of these aspects,

nu t r i t i o n a l

level,

housing,

education,

of

em ployment

12
and income and even Public W e l f a r e Assist anc e.
aspects

Each of these

is d o c u m e n t e d in a di stinct cha p t e r of the ’’P r o ­

ceedings of a W o r k s h o p of the Natio n a l A c a d e m y of S ci en ce"
on the qua l i t y of rural living
1971].

If one wa nts

[National A c a d e m y of Sciences,

further d o c u m e n t a t i o n on se ve ra l of

them, he can refer to the w o r k o f the Pr e s i d e n t ' s Na tiona l
Com mi ssion on Rural Po v e r t y
on Rural Poverty,

1968].

an article rel a t e d to

[President's Nati ona l C o m m i s s i o n

One m e m b e r of this commission,

it, di d not h e s i t a t e to co nclude that:

"By any r e a s o n a b l e standard,

the

instituti ons of rural life

are infer ior to th ose of u rban life"

[Bonnen,

1968].

should be e m p hasized here that the term insti tu ti ons
restricted to p u b l i c
education,

in

in sti tuti ons d e l i v e r i n g

social assistance,

etc.,

but

It
is not

services like

includes pr i v a t e

institutions d e l i v e r i n g the v a r i e t y of co mmer cial goods and
services

that m o d e r n rural peop l e expect.

cult to observe

It is not d i f f i ­

that rural p e o p l e are not rece i v i n g the same

diversi ty in m a n y of these s e r v i c e s - - c u l t u r a l

activities,

health s p e c i alists be ing p r o b a b l y among the best examples.
If the in stit uti ons of u r b a n life are superio r to
those of rural life,

this sho uld not suggest that urban

areas are exempt from problems.
blems are different.

And

It suggests

in fact,

that the p r o ­

w h e n one looks at the

content of a part of the lite r a t u r e dea l i n g w i t h urba n
problems he realizes

that the probl ems most

mentioned are those of congestion,

freque ntly

tr aff ic jams,

c rowded

13
living co nditions w i t h their sugge s t e d u n d e s i r a b l e social
and m en t a l

effects,

urban po v e r t y
and Leach,

pollut ion ,

high crime rates and

[Congress of the Uni t e d States,

1965; Wilson,

This,

noise,

1967;

Ever ett

1967].

along with the data reported in Tables

6,

7 and

8 should be su ffici ent evide n c e that there are p r o blem s
both u r b a n and rural areas.
that,

in

It will be emphasized no w

except for rural and u rban po v e r t y w h i c h are caus ally

interrelated

[Bonnen,

1968],

these p r o blems are not only

diff erent but app ear to have a very differ ent origin:

an

e xces siv ely hi gh or low c o n c e n t r a t i o n of p o p u l a t i o n and
economic activities.
It seems obvious

that conge sti on,

tra ff ic jams and

crow ded living conditi ons ca nn ot oc cur if there
excessive c o n c e n t r a t i o n of p o p u l a t i o n
Similar ly pollution,

air, w a t e r

in a given territory.

(and m a y b e even noise),

are c e r t a i n l y not sev ere probl ems unless
of poll u t a n t sources
the en vironment.

is no

the c o n c e n t r a t i o n

exceeds the a s s imilative c a p acity of

The p r o b l e m of hi gh crime rates

somewhat distinct.

is

U n l i k e the p r e c e e d i n g cases w h i c h are

almost by d e f i n i t i o n a s s o c i a t e d w i t h exce ssi ve conc entration,
crime rates should not n e c e s s a r i l y be hig h e r in c o n c e n t r a t e d
areas.

Factual

(see Ta ble

evide nce supplements he re a priori r easo ning

7).

On the ot her hand,

it seems that m a n y and perhaps

most rural problems have their orig i n

in an in suf fic ient

Table 6.

Selected Social and Economic Characteristics of Population Groups in the United States, 1970.

Characteristics

United
States

Urban

Rural
Nonfarm

Rural
Farm

SMSAs

Center City
of SMSAs

Nonmetro
Areas

Education of Persons 25 Years and Over:
Median School Year Completed

12.1

12.2

11.2

10.7

12.2

12.0

11.4

Percent with Less than 1 Year
of High School

28.3

25.6

35.0

39.4

25.3

28.8

34.9

Unemployment of Persons 16 Years and Over:
Male, Percent of Labor Force

3.9

3.9

4.3

2.4

3.8

4.4

4,0

Female, Percent of Labor
Force

5.2

5.0

5.8

4.7

5.0

5.2

5.6

Income of Persons and Families, 1969:
Per Capita Income of Persons

3,139

3,365

2,530

2,448

3,434

3,281

2,495

Median Income of Families

9,590

10,196

8,248

7,296

10,474

9,507

7,832

Percent of Families on
Public Assistance
Percent of Families in
Poverty
Source:

5.3
10.7

5.4

5.5

3.7

5.2

7.2

5.6

9.0

15.0

15.8

8.5

11.0

15.4

U.S. Bureau of the Census, U.S. Census of Population:
Characteristics, Final Report, PC(1)-C1.

1970, General, Social and Economic

15
Table 7.

Crime Rates by P o p u l a t i o n Group
States, 1970.

Places

in the U n i t e d

Offenses per 100 ,000 P o p u l a t i o n
V iol ent

250,000 P o p u l a t i o n an d Ove r
100,000 - 249,999
50,000 99,999
25,000 49,999
10,000 24,999
Less than 10,000
Suburbs
Rural Areas
Source:

Table 8.

6,167
5,782
4,416
3,814
3,194
2, 539
2,970
1,163

980
450
274
214
159
141
177
102

U.S. B u r e a u of the Census, St a t i s t i c a l A b s t r a c t of
the U n i t e d States:
1972, W ashin gton, D. C. , 19'72,
T a ble 226.-----------------

Nu m b e r of Cities w i t h a S u s p e n d e d P a r t i c u l a t e
M a t t e r Level H i g h e r than 76 M i c r o g r a m s pe r CubiCj
M e t e r by Pop u l a t i o n Groups, Uni t e d States, 1970.

Places

1,000,000
700,000
400,000
100,000
50,000
2,500
Nonurban

Prop erty

P o p u l a t i o n and Over
- 999,999
- 699,999
- 399,999
- 99,999
49,999

Number

of Cities

S amp led

With Above

6
7
15
85 •
31
23
27

6
6
9
62
24
10
1

A c c o r d i n g to Crock er and Rogers, the " c o n c e n t r a t i o n of
p a r ticulate s must ex ceed 70 or 80 m i c rograms per cubic
m e t e r per day bef o r e even the mo st s u s c e p t i b l e parts of
the p o p u l a t i o n wi ll suffer any sort of heal t h effects"
[Crocker and Rogers, 1971].
Source:

U.S. B u r e a u of the Census, St a t i s t i c a l A b s t r a c t of
the U n i t e d States, 1 9 7 2, T a ble 290.

16
p o p ulation an d econom ic act i v i t i e s

conc entr ati on.

not find in rural areas an equi vale nt
ability,

W h y do we

or an a d e q u a t e a v a i l ­

d i v e r s i t y and qu a l i t y of ser vices?

A n important

and m a y b e a f undamental rea son is that they are n ot s u f f i ­
ciently populated.**
pop ul ation which

It is the a g g r e g a t e income of a large

enables a c o m m u n i t y ef f e c t i v e l y to demand

and sup por t a d i v e r s i t y of servi ces and w h i c h reduces
unit costs,

at least up to a ce r t a i n limit.

anything v a l i d

in the economists'

theories

If there is
about

of scale and about a g g l o m e r a t i o n and external
this

sh ould be the case.

mer at ion and external

their

economies

economies,

It ca n be added here that a g g l o ­

d i s economies

pro b l e m of exc essive c o n c e n t r a t i o n

also a ccount for the
in the cities.

These

theories will be r e v iewed in the next chapter.
The pre c e e d i n g d i s c u s s i o n leads one tow a r d the c o n c l u ­
sion that the U.S.

has an u n b a l a n c e d d i s t r i b u t i o n of popu7
lation and econ omi c activity.
It suggests that there are
too man y peo p l e

in the larg est u r b a n areas an d not enough

£
J a n e Ja cobs argues ex t e n s i v e l y that c o n c e n t r a t i o n
a n e c e s s a r y c o n d i t i o n for city d i v e r s i t y and c o n v e nience
[Jacobs, 1960, ch. 11].

7

is

A n o t h e r argu men t no t m e n t i o n e d here, supp o r t i n g this
conclusion w o u l d be that the actual d i s t r i b u t i o n of p o p u l a ­
tion does not c o r r e s p o n d to peo p le's r esiden tial p r e f e rences
reveale d in Ga llup Polls.
De s p i t e the fact that pu blic
po licy shou l d be gu ide d by peo ple's values and pr efer enc es,
this is a w e a k argument.
T hese Polls reveal u n c o n s t r a i n e d
r eside nti al pre f e r e n c e s and v e r y few if any p r i v a t e or public
decisions are unconst rai ned.
This howev er can m o t i v a t e
resear ch to d i s cover what co nstrains peo ple to live whe re
they do not w i s h an d sea rch for means to al ter that situation.

17
people in rural areas.

But the p o p u l a t i o n has been obse rve d

to move from rural to u r b a n areas and from central
the suburbs

of the large m e t r o p o l i t a n areas.

of m o v ement suggests
amenities

that peop l e are m o v i n g

The p a t t e r n

the close access

diver s i t y and qu a l i t y of services no w

p r o vided w i t h a be tte r p e r f o r m a n c e by u r ban areas,

while

avoiding the disadvantage s

of life in the ex c e s s i v e l y c o n ­

centrat ed cent ral cities.

One c o uld argue that this

solution.

Let us

First,

to

in se arc h of the

and o p p o rtunities of ur ban life:

to the abundance,

cities

is the

examine this p r o p o s i t i o n m ore closely.

net m i g r a t i o n from the central ci tie s of SMSAs

is not of a su fficient m a g n i t u d e to c o m p l e t e l y of fse t the
natural

increase of p o p u l a t i o n in m a n y cent ra l

even amon g the largest

[U.S.

Bur e a u of Census,

cities,
1970].

Thus

the a b s olute size of these not only does not d e c r e a s e but
not even pr eve n t e d from increasing,
if, as it was
Second,

suggested,

is

w h i c h w o u l d be desired,

they are alread y too large.

it can be argued that the rate of m i g r a t i o n of

people tow ard the suburbs of the large m e t r o p o l i t a n areas
will m a k e of these,

in a few decades p r o b l e m areas just as

mu ch as the central cities are today.
people comm ute to w o r k in the central
how this p o p u l a t i o n sett leme nt
pollution p rob le ms

An d since m a n y suburban
cities,

one w ond ers

can ease c o n g e s t i o n an d even

in the cities themselves.

It can be o b j ected to the p r e c e e d i n g argument that
the problems

of the cities are the results

of a m i s p l a n n i n g

18
of their dev e l o p m e n t rather than of exces s i v e density,
we can resh u f f l e their

internal org ani zation,

better to org ani ze t r a n s p o r t a t i o n

learn h o w

in cities and h ow to c o n ­

trol p o l l u t i o n in order to av oid these pr oblems
this k nowledg e to the d e v e l o p m e n t

that

and apply

of ou r suburbs.

It is

likely that m u c h can be done in that sense to alle v i a t e some
of the cities'

problems.

W e m ay doubt h o w e v e r that this will

solve all the c i t i e s ’ pro ble ms

and that

it is the most

appro pri ate s o l u t i o n to some of th ese problems.
to pollution,

as one case,

to be the controls

one wonders

if huge suburbs

around a l r e a d y hug e cities.
cert ainly costly.

W i t h res pe ct

h ow severe will have

are going to be d e v e l o p e d

Sev ere p o l l u t i o n control

is

It is always a t r a d e - o f f be t w e e n mo re

goods and services or more c lean air and water.
may be a pure social loss

Part of it

if it is n e c e s s i t a t e d b e c a u s e we

permit mos t of our e c o n omic and social act i v i t i e s

to be

contain ed w i t h i n a ve ry small p e r c e n t a g e of the la nd area
while part of the a s s i m i l a t i v e c a p a c i t y of the rest of the
territory remains unused.

Moreover,

the d e v e l o p m e n t of ou r cities

a better p l a n n i n g of

and subu rbs may c o mple ment

rather than sup pl emen t the e x p a n s i o n of gro wth o utside the
m e t r o p o l i t a n areas,

as A.

Downs suggests:

"In our dif fused poli t i c a l system, c r e ating a
rationa l u r ban development s t r ategy is e x t r a ­
o rdi n a r i l y difficult, ev en w i t h i n a si ngle
m e t r o p o l i t a n area.
My own ex perience on the
National Com m i s s i o n on U r b a n Problem s convinces
me that certai n s p e cific poli c y object ive s
mu st be attain ed be for e w e can crea te any such

19

"strategy.
Th ese obj ec tives are ai med at
expan d ing the p o s s i b l e forms of future u r b a n
d e v e l o p m e n t bey o n d p e r i p h e r a l sprawl, w h i c h
now enco mpasses almost all u r b a n growth"
[Downs, 1970],
Finally it can easily be shown,

from st atements of

persons w h o s e task or f u n c t i o n is to trans l a t e people's
values and preferences

into a cons i s t e n t set of goals

the socie ty and/or specific p o l icies
them,

and progr ams

for

to achieve

that the curre nt set t l e m e n t tr end is not socially

accepted no r p e r c e i v e d as a s o l u t i o n to the c o m b i n a t i o n of
problems described.

For example,

there

is the sta teme nt

from the Natio nal Goals Re search S taff in a report pub l i s h e d
in 1970:
"Hence the choice of no change in pu blic p o l i c y
as d iscussed earlier in this chapter, w o u l d
run the high risk of b r i n g i n g about the kin d
of future in w h i c h the c o m m u nities of bo th
u r ban and rural A m e r i c a w o u l d furth er d e t e r i ­
orate.
It m e ans that hundr eds of A m e r i c a n
towns will contin ue to lose y o ung peo p l e and
econ omi c opportunity; an d that the large m e t r o ­
p o l i t a n areas, a l r e a d y b u r d e n e d with social
and fiscal probl ems and c h a r a c t e r i z e d by
f r a g m e n t a t i o n of g o v e r n m e n t respons ibi lit y,
ma y reach a size at w h i c h they will be socially
intolerable, p o l i t i c a l l y unma nag eab le, and
e c onomically inefficient.
On the o the r han d
there is the ch oic e of decisive pu bl ic po licy
an d act ion to achieve a d i f f e r e n t and more
promi s i n g future for the co u n t r y as a whole.
The o b j e c t i v e of this c h o i c e mig ht be to p r o ­
mote mo re b a l a n c e d d e m o g r a p h i c growth in order
to affect p o s i t i v e l y the q u a l i t y of life in
both u r ban and rural A m e r i c a " [National Goals
Rese arc h Staff, 1970],
The next st at ement
States:

is from the Congress

of the Uni ted

20
"The Congress commits it sel f to a s ou nd balan ce
b e t w e e n rural and u r b a n America.
The Congress
considers this balance so es sential to the
peace, p r o s p e r i t y an d w e l f a r e of all our
citizens that the h ighest p r i o r i t y m u s t be
given to the r e v i t a l i z a t i o n an d d e v e l opmen t
of rural areas" [U.S. Congress, 1970, p. 1383],

An d the President,
Act in August,

1972,

w h e n sig ning the Rural D e v e l opment

said:

"Even with the shortcom ing s I have n o t e d in
this Act, it is a significant first step in
our d e t e r m i n a t i o n to s t r e n g t h e n economic
op p o r t u n i t y and c ommu n i t y life thro ughout
rural A m e r i c a " [National A r e a Deve lopment
Institute, 1972] .
It is clear from the above statem ent s
main reasons wh y
socia lly a c c epted
behind.

the current
is that

that one of the

se ttlement p a t t e r n is not

it leaves n o n m e t r o p o l i t a n areas

The ration ale why this

fact w o u l d be u n a c c e p t a b l e

is not spelle d out in the li te r a t u r e covered.
for granted or as given.
here.

T w e e t e n for one,

ment starts

It is taken

It co uld p r o bably be taken as such
in a recent paper,

on rural d e v e l o p ­

from a de s c r i p t i o n of the same types of rural

problems we have di scus sed to conclude:

" C l early a strong

pr o g r a m of resear ch and act ion is es sential to deal wit h
problems of rural

areas an d to p r o m o t e rural develo p m e n t "

[Tweeten,

Neverthel ess ,

1972].

the au thor of this thesis

prefers to of fer in the followi ng s e p arat e section,
this is a hig h l y nor mative matter,

an argument s u g gesting

why it is not a c c e p t a b l e for s ocie ty to leave rural
with their problems.

since

areas

21
A Mo re Personal Stat ement of the A u t h o r
on the Sett l e m e n t P r o b l e m
The author believes

that the m o s t f u n d a mental reason

wh y the current se ttle ment p a t t e r n needs

to be m o d i f i e d

is that it leaves behi n d rural areas w h i c h are los i n g their
pop u l a t i o n and p r o b a b l y man y of the mo s t p r o d u c t i v e elements
O

of that population.

He be lieves that rural areas

gain not lose popul atio n,

not only be c a u s e

or f a c ilitate the s o l u t i o n of the pro blems

should

it w o u l d ease
of o ther areas

but for the sake and w e l l - b e i n g of rural re sid ents

themselves.

This p r o p o s i t i o n is b e l i e v e d to fol low from one o f the
most c o m monly he ld values of the citizens of this country:
fair treatment,
discrimination.

equalit y of o p p o r t u n i t i e s

and access w ithout

It is si mply an ap p l i c a t i o n of the prin c i p l e

of equal ity of o p p o r t unities and access,

to the quality,

abundanc e and d i v e r s i t y of co llective servi ces w h i c h are the
products

and proba b l y the sole purpos e of our social

organization.
Be fore going further,

it mu st be n o t e d that the p r o ­

ceeding p r o p o s i t i o n is d iff e r e n t fr om adv o c a t i n g e q u a l i t y of
income distribution.

Income d i s t r i b u t i o n is the produc t of

Q

Natural m i g r a t i o n m o vements are p r o b a b l y n ever a
soluti on to any p r o b l e m o f an area be c a u s e they typ ically
remove fr om the area m a n y of the element s that c ould best
cope w i t h its problems, those m o s t able to adapt th emselves
to chang ing situations.
Net m i g r a t i o n from the central
cities can be a s o l ution to c i t i e s 1 prob lem s only if it is
ba lan ced in terms of the age, social ch ara cte rist ics,
economic in telli gen ce an d at tit udes of the migrants.

22
both the social

o r g a n i z a t i o n and the pe rson al

effort and
a
individual c o n t r i b u t i o n to the p r o d u c t s of the nation.

Pro moting equal

income d i s t r i b u t i o n w o uld c o n f l i c t w i t h

another comm o n value of the citizens,

the c o r r e s p o n d e n c e

of rewards wi th the perso nal

c o n t r i b u t i o n to the so cia l

product.

to col l e c t i v e

almost

E q u ality of access

services

is

to tally the pro du ct of the social org ani zat ion .

It is a m a t t e r of social ju s t i c e w h i c h is b e l i e v e d not to
confl ict w i t h any ot her im port ant values.
One ma y obje ct that the above p r o p o s i t i o n to p r o m o t e
equal ity of access

to social

servi ces assumes a greate r

u n i f o r m i t y of valu e s

and p r e f e r e n c e s

services

in fact.

than exists

of pe o p l e for these

He can argue that several

people have been o b s e r v e d to mo ve to rural
these services.

He can argue that rural people,

lived in an u r b a n en vir onme nt,
we assu me they do.
we sugge st

to veri f y

who n e v e r

do not suff er the depriv a t i o n s

As a p artial a n s w e r to this obje cti on,
if the m a j o r i t y of those wh o leave the

big city do it to "es cap e"
may also be peop le who,

its servi ces or

its smog.

after th eir mig ration, will

in a bett e r p o s i t i o n than the average rural
access

areas to "es ca pe"

to u r b a n services.

The y
rem ain

resident to have

W i t h r espect to the idea that

^Social scien tis ts i n c r e a s i n g l y b e l i e v e that it is
probably m u c h more the p r oduct of the social o r g a n i z a t i o n
than we ha ve been u s e d to thinking.
Thus a m o v e toward
more equal income d i s t r i b u t i o n w o u l d also be j u s t i f i e d but
it is u n n e c e s s a r y to burd e n the above argu ments w i t h this
add itio nal matter.

23
rural peop l e may not

expect a 20th ce n t u r y u r b a n lifestyle,

one has only to look at the w r i ting s of peop l e who have
listened to the tes timonies of rural peop l e the mselves
people who work w i t h them
p.

5, 9,

12 and 13],

[see Bonnen,

Even if it was

1968,

and

especially,

the case, who could

argue that we should leave rural p e o p l e wit h a poor s c h o o l ­
ing system,

for on e example,

be c a u s e they are h a p p y w i t h it?

We must now address our sel ves

to anot her o b j e c t i o n

which will lead us to re f o r m u l a t e the arg ume nt of this
section in a somewh at di ffe rent

framework.

One may w o n d e r

how it is p o s s i b l e to argue for e q u a l i t y of access

to c o l ­

lective services w ithout d i s c r i m i n a t i o n no m a t t e r the pl ace
of residence.

One can argue that

if an indiv idua l feels

d i s c r i m i n a t e d in his access to the col l e c t i v e ser vic es he
desires bec au se of his place of resi dence,
to move just as, we have

shown,

he has the opt i on

so m a n y pe op le do.

This

might be a vali d o b j e c t i o n u nder ce r t a i n cir cums tances,
for c ertain areas,

or

but it cann ot be ar gue d that so c i e t y has

no general r e s p o n s i b i l i t y to p r o m o t e rural d e v e l o p m e n t for
one ve ry spec ifi c reason,

w h ich

is

important

to e x p l i c itate

and understand.
Person al

locat ion has g e n e r a l l y been c o n s i d e r e d a

ma tter of ind ivid ual
society.

choice.

It is a right,

however,

one's ch oice of occupation.
made,

This

is right for a d e m o c r a t i c
w h i c h is c o n s t r a i n e d by

Once this choice has be en

severe co nstraints may s u b s t a n t i a l l y limit the range

24
of further choice.

For example,

one may ch oos e to be a

food r e t a i l e r and settle w h e r e he wa nts p r o v i d e d there are
customers at the lo cati on selected.
General Mo tor s

He m a y cho o s e to be a

employ ee and settle w h e r e he wants but he

must be close to w h ere G.M.

has plants.

Or he m a y choose

to be a fa rmer and settle w here he wa nts but he still mus t
be close to w here his farm is located.

On e can h ar d l y be

a resid ent of the Detroit area and a full time w o r k e r on
a farm v e r y far away from Detroit.
But,

these rem ote rural areas ma y have v a l u a b l e non-

mobile re so urc es
technology,

(like a g ricultural

the n u m b e r of perso ns

land).

G ive n m o d e r n

r e q u i r e d to exploit

fully

these resou rce s may be too l i m i t e d to c o n s t i t u t e an a g g l o ­
m e r a t i o n of p o p u l a t i o n of the size n e c e s s a r y to sup por t the
services
which,

that the se persons,

we have suggested,

as citizens,

expect and to

they are entitled.

If there are

forces at w o r k in the economi c syst e m tendin g to c o n c e n ­
trate in other areas

the p o p u l a t i o n and econo mic activit ies

not cl o s e l y tied to the e x p l o i t a t i o n of these resources,
p rob lem arises w h i c h confronts
betwe en a few alternatives.
of rural

areas

these areas,
resources

a

the so c i e t y w i t h a cho ice

It m a y

(a)

for ego

the re sou rces

and be p r e p a r e d to help peop l e m o v i n g

from

(b) provide to the pe op l e exp l o i t i n g these

the means

to de riv e from this activ i t y the s u p p l e ­

ment of income that w o u l d comp e n s a t e
to good c o l lective services,

(c)

for the lack of access

incr eas e the r e s earch

25
efforts and pub l i c programs
areas the services

to m a k e av ailable

that their l i m i t e d p o p u l a t i o n cannot

support or to give them easy access

(through subs i d i z e d

air t r a n s p o r t a t i o n facilities perhaps)
where the services
a p p r o p r i a t e means

in these

to remote centers

are a d e q u a t e l y supplied,
to br ing

(d)

take the

into s e l e c t e d centers

areas the economic act ivi tie s wi t h o u t

of rural

current ties to rural

areas that will generate the a g g r e g a t e

income an d support

the p o p u l a t i o n size r e q uired to pr o d u c e locally a v a r i e t y
of go od s er vi ces at comp a r a b l e costs and w i t h i n a c o n v e n ­
iently comm u t i n g d i s t a n c e of rural
For ce r t a i n areas
logical

residents.

the first al t e r n a t i v e m ight be the

ch oice as we ll as the second in other cases.

current de bat e about rising food prices
that the societ y is not p r e p a r e d
choices

The

s t r o n g l y sugges ts

for any of these two

if they we r e to be app li ed on a s i g n i f i c a n t l y

large scale.
The* th ird a lternative
rese arc her s

makes

any

on rural de v e l o p m e n t m ight

to improve on the quality,
services

includes

to good

The approach

The co n c e r n for high q u a l i t y services

rural reside nts

is the same as our concern.

high qu a l i t y services
c ert ain to be costly.
si dize d basis.

or means

imagine and p r omote

d e l i v e r y and access

to the actual rural residents.

sense.

ideas

to

But to p rovide

to a s p a r s e l y s e t t l e d p o p u l a t i o n

is

It cannot be o f f e r e d but on a s u b ­

Ho w perma n e n t

such an approach w o u l d be is

26
cert ainly question able .

Unless

it can p rov e to be an

effective means of at tracting to rural areas

the p o p u l a t i o n

size that w o u l d eve n t u a l l y suppor t by its elf these services,
the a p p roach runs the risk of being discarded.

A seco n d a r y

hy poth esi s of this r e s e a r c h is that pub l i c spending to
make rural areas att r a c t i v e is a w e a k means

to b ri ng m o r e

economic a c t ivity and p o p u l a t i o n into rural areas.
This brings us to the fourth al t e r n a t i v e w h i c h aims
at divertin g gro w t h from large m e t r o p o l i t a n areas to
selected centers of rural areas.

This appears

as the most

logical and obvious ch oi ce and an swer to the c o m b i n a t i o n of
problems w e have described.

It offers

an answer to the

equity p r o b l e m of a soc iety w h i c h ben efit s
tation of the reso urces

of rural areas

fr o m the e x p l o i ­

but w h ic h

is so

or ganized that th ose d i r ectly linked to these activit ies
often live in a depre s s e d and part l y d i s o r g a n i z e d social
environment.

Unli k e

the o ther three alter n a t i v e s discussed,

it s i m u l t a n e o u s l y offers an answ e r to the p r o b l e m of
incre asi ng o v e r c o n c e n t r a t i o n in large m e t r o p o l i t a n areas.
It must be n o t e d that this p r o p o s i t i o n is very
diff erent from ad voca ting a d i s p e r s e d s e t tlement p a t t e r n
which might be equa lly cost ly for the socie ty as either
the p o l l u t i o n control or the r e s h u f f l i n g of the internal
o r g anization of the

incr eas in gly o v e r c o n c e n t r a t e d m e t r o ­

polis or the s u b s i d i z a t i o n of the d e l ivery of good services
to a sp ars ely sett led rural popula tion .

We w ould not

27
propose to div ert gr owt h from the large m e t r o p o l i t a n areas
to each o f the 14,557 small towns and vi llages
country,

but to a limit ed num b e r of centers

which will
centers

serve as

of the

of rural areas

industrial p r o d u c t i o n and ser vice

for the h i n t e r l a n d rural population.

An important

part of the t he oretical argument p r e s e n t e d in the next
chapter suggests that

a more balan ced d i s t r i b u t i o n of

pop u l a t i o n and economic gr owth would p r o d u c e su bst anti al
benefits for the s o ciety as a whole.

T h ere remains

que st ion of ho w this m ight be achieved.

the

That is p r e c i s e l y

what this r e s e a r c h is about.
The Need for Further Re search
on the Quest ion
If the current set t lement pat t e r n
accepted,

is not socia l l y

res earch d e s i g n e d to better u n d e r s t a n d h o w it is

g ene rated is n e c e s s a r y before one can intel l i g e n t l y plan
any act i o n to mo d i f y

it.

It mi ght be arg ued that we know the answers
questions,

to these

since the pub lic autho r i t y has alrea dy p r o v i d e d

l e g i s l a t i o n w h o s e aim is to achieve a more b a l a n c e d d e m o ­
graphic and economic gro wth

[U.S.

Congress,

1972],

This

l egi slation may embody the current state of know l e d g e on
the question,

but it is easy to suggest that our k n o w l e d g e

of h o w the sett lem ent pa t t e r n is generated is limited.
The Rural De v e l o p m e n t Act contains
the same type of provi sio ns

the same a p p roach and

(loans and grants

to incite

28
enterprises

to locate in d e p r e s s e d areas and small cities

and pu blic sp ending for facil iti es m a k i n g these areas
attractive)
and others
Credit,

w h i c h have been u s e d for years
[International

1964].

in this c ount ry

Information Ce nt er for Local

These efforts have

failed since the

pro blem is still mo re than ever with us.
This

is not to argue that the approach is to t a l l y

wrong.

The theory on w h i c h it rests

we will

see.

has some validity,

One might argue that we have ye t to p r o v i d e

the m i n i m u m level of funds n e c e s s a r y
the thesis w h i c h is exami ned here
not yet

as

for success.

However,

is that the the o r y has

ide ntified all the relevant and im po rtan t

factors

explai nin g why some regions gr ow and others do not and
th erefore has not yet s u g g e s t e d the most ap p r o p r i a t e
effective means

to alter the se ttleme nt pattern.

and

This

brings us to the formulation of the basic h y p othesis of
the research.
The Basic H y pothesis of the Resear ch
To reverse in favor of rural
trends towards

the geographic c o n c e n t r a t o n of p o p u l a t i o n and

economic activities
an easy task.

areas the obser v e d

in the larg e m e t r o p o l i t a n areas

It wi ll require

extre m e l y powerful

There are not ve ry ma ny such forces

at w o r k

is not

forces.

in our society

to w hich one could ass ign the task.
One of these pow erf ul

forces

is the federal government.

Its i n tervention is likely to be r e q uired a l t hough p r o bably

29
not throu gh the a p p r o a c h it has
just suggested,

f o l lowed thus

appears to be a w e a k one.

far which,

we

Th is m ight be

co nsi dered as a s econdary hyp o t h e s i s of this research.
A n o t h e r v e r y powe rfu l

force at w o r k in our social

o r g a n i z a t i o n is the large corporation.

W hil e we have

ob se rve d a tr end toward the g e o g r a p h i c c o n c e n t r a t i o n of
p o p u l a t i o n and economic ac tivities,

the indust ria l o r g a n ­

ization spe cialist has been o b s e r v i n g an o t h e r type of trend
toward concentration:

the c o n c e n t r a t i o n of the control

of econo mic activ iti es

in the ha nds of a few h u n d r e d

co rpor ati ons

(Table 9).
T a ble 9.

Year
1929
1939
1947
1954
1958
1962
1963
1966
1967
1968
Sources:

Perc e n t a g e of the Val ue
A dde d by M a n u f a c t u r e and
of the Total M a n u f a c t u r i n g
As sets O w ned by the 200
Large st M a n u f a c t u r i n g
C o r p o r a t i o n s , S e l e c t e d Years

Value A d d e d

30
37
38
40
41
42
42

Ass ets
45.8
48. 7
45.0
50. 4
55. 2
55.1
55.5
56.1
58. 7
60. 4

1) U.S. B u r e a u of the C e n s u s f
C o n c e n t r a t i o n Ratios in M a n ­
u f a c t u r i n g . 1967 , S peci al
R e p o r t s , 1 9 VO , P t . 1, T able 1.
2) Feder al Tr ad e C o m m i s s i o n
Staff, E c o n o m i c Report on
C o r p o r a t e M e r g e r s , 1969.

30
It is s u g g e s t e d here that these two trends m a y not
be unr ela ted ,

that th ere is a ca us al r e l a t i o n s h i p b etween

the c o n c e n t r a t i o n of the cont rol o f ec o nomic a c t ivities
withi n a fe w hands and the g e o g r a p h i c c o n c e n t r a t i o n of
popu l a t i o n and economi c activities.

It m a y be that these

large " c o n t r o l l e r s " have few natur al reasons

to d i s p e r s e

their increa sing ac tivi ties

over too huge a terr i t o r y and

espe cia lly over small rural

centers.

they bel i e v e

This m a y be b ecause

it is easi er in this wa y to s uper vise the

activ iti es of their m a n y est abl ishments,

for the c o n v e n ­

ience of air trav eling b e t w e e n impor t a n t centers or for
other reasons.
convince

We w o u l d even argue that

if w e could

(by the threat of d i s s o l u t i o n or o t he r means)

the 200 or so largest m a n u f a c t u r i n g c o r p o r a t i o n s - - w h i c h
control m o r e than 60 pe r c e n t of the m a n u f a c t u r i n g assets
of the economy--to de v e l o p rural

areas,

they w o u l d s ucce ed

regard les s of any o p p o s i t i o n they m i ght me e t

in their

attempt to do it.
M o r e sp ec ifically,

it is h y p o t h e s i z e d that the choice

of locati ons of the larg est m a n u f a c t u r i n g c o r p o r a t i o n s
the domin a n t

factor a c c o u n t i n g for area d i f f e r e n t i a l s

the gr ow th of economic
this h y p o t h e s i s

activities.

The

is
in

i n v e s t i g a t i o n of

is the prime object of this research.

The next ch apt er formulates

theoretic al arg ume nts

suggesting that the large c o r p o r a t i o n s
di s t r i b u t i o n of econo mic gr owt h w hile

can cha nge the
the em pi rica l part

31
of the r e s e a r c h will
changed some element s
and 1970.

try to v e r i f y

if they a c t u a l l y have

in that d i s t r i b u t i o n b e t w e e n 1960

First we must form u l a t e the s p e c i f i c objec tiv es

of the research.
The Obj ectives of the R e s e a r c h
The specific objectives

of this r e s e a r c h are

the

following:
1.

To

investigate and descr i b e the g e o g r a p h i c

d i s t r i b u t i o n of the em ployment of the largest
m a n u f a c t u r i n g corpor a t i o n s

an d rela t e this d i s ­

t r i b u t i o n p a t t e r n to the level and gro w t h of
p o p u l a t i o n and eco nom ic a c t i vities
investigated,
2.

in the areas

for the p e r i o d 1960 to 1970.

To test the hyp o t h e s i s

that the ch oic e of locations

of these large corpor a t i o n s

im p o r t a n t l y c o n t r i ­

butes to e x p laining area d i f f e r e n t i a l s
gr owt h of econo mic ac ti vi ties ,

in the

an d s i m u l t a n e o u s l y

verify the s i g n i f i c a n c e of ot her v a r i a b l e s

long

b e l i e v e d to c o n t r i b u t e s omething to these
differentials.
3.

To draw some p o l i c y implicat ion s
for the future p l a n n i n g

from the findings

of rural d e v e l o p m e n t and

rural de v e l o p m e n t strategies.

C H A P T E R II

A T H E O R E T I C A L BASE TO S U P P O R T THE
H Y P O T H E S I S FOR M U L A T E D

One logical first step of a res ea r c h process desig n e d
to find bet t e r means

than those p r e v i o u s l y us ed to solve a

probl em is to try to de velop a be tte r theoretical u n d e r ­
standing of h o w the p r o b l e m is generated.

We also need to

u n d e r s t a n d the reasons why the current means u s e d to p e r f o r m
the task are ina dequate and to d r a w from that k nowle dge
and o t h e r sources
This

support

for a h y p o t h e s i z e d new approach.

is our task in this chapter.
We first

review, w i t h o u t b r i n g i n g in any n e w a r g u ­

ments what the ory and theo rists have suggested about the
locat ion of the

firm,

the locat i o n of econ omi c activ iti es

and the reasons why the global p a t t e r n of: locat i o n might
be more c o n c e n t r a t e d than s o c ially desired.

W e then q u e s t i o n

the v a l i d i t y of some of the as s u m p t i o n s of these theories,
emph asize aspects of th ese and ot her theories a n d the
results of some em pir ica l
1.

in vestig a t i o n s to suggest that:

The cho i c e of locat ion s of the large m a n u f a c ­
turing firms m a y be r e l a t i v e l y free v i s - a - v i s
eit her the b asic l o c ation factors

32

ide n t i f i e d by

33
the theories and the r e l a t e d p o l i c y tools u s e d
by pu bl ic auth orities

to infl uence

firms'

location decisi ons and,
2.

the cho ice of loc ations of the la rge m a n u f a c ­
turing firms m a y be of c r i tical i m p ortance in
explaining wh y regions

and areas

grow at w i d e l y

va r y i n g rates.
Lo c ation Theori es and the S patial D i s t r i b u t i o n
o f Econo mic A c t l v i t i e s
Lo cat ion theories w e r e first d e v e l o p e d to reme d y an
important sh o r t c o m i n g of the r e c e i v e d econ omi c theory:

its

almost compl ete a bs t r a c t i o n fr om spac e con siderations.

It

is no surprise that the first m a j o r and a still
concern of l o c ati on th eorists
costs.

Such is the case,

important

is the analy sis of t r a nsfer

to name a few of Von T h u n e n and

his rent theory in w hich the m a i n v a r i a b l e exp l a i n i n g spatial
diff ere nti als

in rent

is the d i s tance to the m a r k e t center,

or A l f r e d W e b e r and his m a t erial or ma rk et o r i e n t e d i n d u s ­
trial p r o d u c t i o n accor d i n g to the t r a n s p o r t a t i o n c h a r a c t e r ­
istics of the m a t e r i a l used
losing material,

etc.],

of H o o v e r and his

min i m i z i n g total transfer
costs,

(procurement

and of Isard and his
T r a n s f e r costs,

(localized mat eri al,

however,

into th ree groups:

types of transfer costs,

(b)

l o c a t i o n point

and dist rib uti on)

trans p o r t inputs.
ar e not the only locat ion

factors c o n s i d e r e d by theorists.
factors

weight

(a)

Isard cla s sifies

these

tra nsport costs and othe r

the several costs ass o c i a t e d

34

with labor,

power, water,

taxes,

insurance,

inter est and,

(c) the elements w h i c h give rise to a g g l o m e r a t i o n and
d e g l o m e r a t i o n eco nomies

[Isard,

1956, p.

138].

The last two categ ori es of facto rs are not c o m p l e t e l y
distinct.

Th ey have at least

in c o m m o n to be p a r t of an

important location theory first

i n t r o d u c e d by W e b e r an d

which sugg est s that savings on labor costs and economies
due to the large scale of o p e r a t i o n of a firm or of a
group of firms agglo m e r a t e d in a given l o c a t i o n ca n c o m ­
pensate for po ssibl y hi ghe r t r a n s f e r costs.
We will see later,
important theory,

w h e n we w i l l come back on this

that labor is one o f these elements

giving rise to agglo m e r a t i o n economies.

For n o w let us

only empha size the s u b s t i t u t i o n f r a m e w o r k in w h i c h this
formu lat ion puts the p r o d u c t i o n cost aspect of the l o c a ­
tion problem.
tion decides

Isard suggests that w h e n a unit of p r o d u c ­
to shift to a cent e r of agglomerat ion ,

it

"may be v i s u a l i z e d as s u b stituting tr an s p o r t out lay s
p r oduction outlays

of one sort or a n o t h e r "

p. 179].

a proper c a l c u l a t i o n of all these

In fact,

[Isard,

for

1956,

possi ble s u b s t itut ions enables the fi rm to de rive an
"outlay s u b s t i t u t i o n line"
"space cost curve"

[Isard,

[Richardson,

1956, p.

1969, p.

129]

or a

77] or a set of

such lines w h e n it co nsiders sev eral p o s s i b l e levels of
output.
point.

It can this way d e t e r m i n e a least cost l o c a t i o n

35
But the firm does not n e c e s s a r i l y lo cate at the least
cost of p r o d u c t i o n point.

Its d e c i s i o n also depen ds on the

level of dema n d it can expect at that point.

It must t h e r e ­

fore look at the dem a n d side of the lo cation problem.
August Losch w i t h his d e m a n d cone was am ong the first
theorists

to de ve lop tools to de riv e spa tial d em a n d r e l a ­

tionships.

R i c h a r d s o n cr iticizes the L o s c h i a n d e m a n d cone

and comes up w i t h a "modi f i e d spatial d e m a n d cone" fr om
w hich can be d e r i v e d a "space reve nue cu rve"
1969, p.

69 to 77].

space cost curves,
lines

[Isard,

[Richardson,

Comp a r i n g the space r e v e n u e to the
or u sing

1956,

p.

134],

Isard's

iso-revenue-less-outlay

the firm can th en find its

profit m a x i m i z i n g

locatio n or o p t i m u m location if the

usual assumptio ns

reg arding the obj e ctives of the firm

are made.
The theories m e n t i o n e d thus

far do not m a k e any

explicit infer enc e about the total d i s t r i b u t i o n of economic
activities arisi ng from the loca tio n d e c i s i o n s of the
individual
mizing

firms

location.

attemp tin g to se ttle at the profit m a x i ­
At tempts to do so ha ve been m a d e however.

Isard integrates his

tr an sport

input conce pt of the the ory

of p r o d u c t i o n into a m a t h e m a t i c a l
h ims elf m o d e s t l y calls:

f o r m u l a t i o n of wh at he

aspects of a gene ral

lo catio n

theory w h i c h is conc e r n e d w i t h an " o p t i m u m s p a c e - e c o n o m y ,
primarily from a locati on s t a ndpoint w i t h emphasis on t r a n s ­
p o r t a t i o n costs"

[Isard,

1956,

Ch.

10].

Rich a r d s o n revie ws

36

the con tri butions of three o t h er authors
of location

[Richardson,

1969,

Ch.

5].

to a gener al theory
Losch and Gr een hu t's

co ntri butions

are jud g e d far too r e s t r i c t i v e in their

assumptions.

L e f e b e r ’s f o r m u l a t i o n is p r e s e n t e d as ha vi n g

much gr e a t e r ge n e r a l i t y and r e p r e s e n t i n g a w o r t h w h i l e
attempt to inc orp orate space in a W a l r a s i a n ge ne ra l
brium framework.

His m odel

optim um locations,

is d e s i g n e d to d e t e r m i n e the

the o p t i m u m a l l o c a t i o n of p r o d u c t i v e

factors and the spatial

flows of final goods to each m a r k e t

and to m a x i m i z e the v a l u e of total output.

Al l this

obtai ned u nder con ditions of pure com peti tio n,
knowledge and no instit utional rigid it ies.
back and diff e r e n c e

equili­

is

perfect

Its m a j o r d r a w ­

from the W a l r a s i a n sy s t e m is that it is

a p r o g r a m m i n g m odel b ound by linear m a x i m i z a t i o n as sumptions
and by an in abi lity to h a n d l e dema n d relati ons hips :

the

prices have to be s pecified a r b i t r a r i l y rat her than
det er mined w i t h i n the model.
Richards on's

general comment o n these a tte mp ts

that no fully s a t i s f a c t o r y general
been developed.

Neverth ele ss,

is

the ory of l o c ation has

it seems

that we have been

brought,

in the intentions

authors,

close to a spatial equ i v a l e n t of the o p t i m u m of

the spac eless
tions are not,

if not the a c h ievements of these

economic theory.
however,

Th es e m a t h e m a t i c a l

formula­

the only nor n e c e s s a r i l y the most

enl ightening w a y to examine h o w the actu al set t l e m e n t
patter n has been generated,

how large in dus trial center s

37
have developed.

It seems w o r t h w h i l e an y w a y to e xamine in

grea ter det ail Weber' s
by Ho over and

a g g l o m e r a t i o n t he o r y as e x p r e s s e d

Isard.

W e b e r s u g g e s t e d that econ omi es can res u l t of the
enlar gem ent of the size of an in dustrial c o n c e n t r a t i o n at
a given geo g r a p h i c point.
economies or so metimes
Isard cla ssifies
wit hin a firm,

T h e s e are call e d a g g l o m e r a t i o n

ec ono mies of c o n c e n t r a t e d product ion .

them as follows:

(1)

L a r g e - s c a l e economies

co nsequent upon the en l a r g e m e n t of the firm's

scale of p r o d u c t i o n at one location,

(2) l o c a l i z a t i o n

economies

for all

firms of a sin gle indus try at a single

location,

conse que nt u p o n the enlargement of the total

output o f that indu str y at that
tion eco nomies
location,

and

(3) u r b a n i z a ­

for all firms of all in dustri es at a si ngl e

c ons e q u e n t upon the en l a r g e m e n t of the total

economic size of that location,
together

location,

[Is ard, 1956,

p.

for all

indus tri es

taken

172].

H o o v e r suggests that t hree ba sic p r i n c i p l e s operat e
to reduce the costs of p r o d u c t i o n w i t h i n a firm w i t h larger
output:

"multiples",

transactions"

"mas sing of reser v e s " and "bulk

[Hoover,

1948,

p 78-80].

In other terms,

economies of large scale w i t h i n a single unit of p r o d u c t i o n
arise b e c a u s e

(1)

it is p o s s i b l e to use m o r e

fully i m p e r ­

fectly d iv isible units of e q u i p m e n t and labor,

(2] b ecause

the m a s s i n g of reserves n e c e s s a r y to p r o v i d e for accidents,
rout ine maintenan ce,

inter rup tion s

of su ppl y and v a r i a t i o n

in dema n d w o u l d be less than p r o p o r t i o n a l to the no rmal

38
output and finally,

(3) be c a u s e bulk t r a n s a c t i o n s comm and

a lower unit p rice for mat eri als ,
purc has ed b e c a u s e of savings

supplies and services

in the costs of d e l i v e r y or

the g r e a t e r b a r g a i n i n g p ower of the large enterprise.
L o c a l i z a t i o n economies

arisi ng w i t h the clu st er ing

of seve ral firms of a g i ven ind us try into a sing le loca tion
result

(1)

from the access

to a lar ger pool of skilled

labor,

tr a i n e d for the speci fic requir e m e n t s of that industry

and r a p i d l y in t e r c h a n g e a b l e b e t w e e n est ablishments,

(2)

from a greate r a v a i l a b i l i t y and fuller use of s p e c i alized
and auxi l i a r y

industrial

and rep air facilities,

(3)

large lot buy i n g and selling thr o u g h com mon brokers
jobbers,

(4)

of m ater i a l s

from
and

from c a r l o a d or t r a i n l o a d or sh ipload d e l i v e r y
or

(5)

from the d e v e l o p m e n t over the years of

the sp e c i a l i z e d financial,

accounting,

cou n s e l i n g or

actuarial servic es need e d by the firms of that industry.
U r b a n i z a t i o n economies p r e s e n t e d earli er as those
which arise from the clus t e r i n g of several

firms of several

industries into a single area of produc tio n,

st em

(1)

from

"a higher level of use of the gen era l a p p arata of an u r b a n
structure
mains,

(such as t r a n s p o r t a t i o n facilities,

and the like)

economic ac tivities
[Isard,

1956,

activities

p.

and

(2)

(daily,

182].

gas a n d w ate r

from a finer a r t i c u l a t i o n of
sea s o n a l l y and interi ndu str iall y)

The finer a r t i c u l a t i o n of economi c

is the result of variou s kinds of linkages

existing b etween ind us trie s like trade connec tio ns,

the

39
co mple mentary use of labor or other inputs or a u x i l i a r y
services

like banks, utilities,

of w h i c h H o o v e r gives several

fire and poli c e protection,

examples

[Hoover,

1948,

p 116-

123].
If th ere are ec onomies of c o n c e n t r a t e d produc tio n,
is well kn own that there are d i s e c o n o m i e s
Hoover points

out,

as well.

the m a n agerial r e q u i r e m e n t s

types of b us in ess m ay con ver t scale ec ono mies
diseconomies,

the adva nta ge of the access

it

As

of some
into scale

to a large pool

of trai ned labor can be c o n v e r t e d into a d i s a d v a n t a g e o u s
infl exi bil ity with the incre ase in the b a r g a i n i n g p ower of
this sp e c i a l i z e d labor force.
as p o p ulation numb ers

increase,

Isard also p r o v i d e s

examples:

as c o n g e s t i o n mult iplies,

as the jo u r n e y to w o r k increases as w e l l as the time lost
by truck driv ers

in traffic jams,

and the cost o f food su pply rise,

as rents,

land values

d i s e c o n o m i e s m ou nt

in

r elati ve importance.
It is p r o b a b l y p o s sible to ill ustrate g r a p h i c a l l y
this d i s c u s s i o n about a g g l o m e r a t i o n eco nomies and d i s ­
economies.

Isard anyw ay invites us to imagine that s omehow

it is p o s s i b l e a priori to iden tif y for every service and
commodity,

w h o s e p r o d u c t i o n or costs

economies and diseconomies,
less di se conomies)
figure,
p.

187].

reflect u r b a n i z a t i o n

a net economy curve

(economies

in r e l ati on to given city sizes.

taken from Isard's bo ok is shown b elo w

The

[Isard,

1956,

The curves c o r r e s p o n d i n g to a few of the activ iti es

40

subject to u r b a n i z a t i o n

(dis)

eco nomies are s hown plus one

curve w hich is a su mma tion of the others.

Total eaoncmies

Transportation eaoncmies
«

\
Labor economies

-d

!3
Power economies'.
t
1

I -

\
\

Educa£j.gp jgqQncmies

10

Figure 1.

r

000

H y po thetical
size.

100'0 0 0 i /ooijooo«v

\

econ omies

population

of sc ale w i t h urb an

There are obvi o u s l y great d i fficulti es

to cons truct

empirically each of these curves and logical objections to
the c o n s t r u c t i o n of their summation.

The main objection is

that the total net econo my c u rve assumes the exis t e n c e of
standar diz ed cities w here the c o n g e s t i o n costs,

for example,

operate the same way rega rdl ess of p h y s i c a l con figuration.
It also assumes that an equal wei g h t sho u l d be given to each
component cur ve for every city regard les s of its in dustrial
composition.

S t a n d a r d cities do not exist and the in dustrial

41
mix varies

from city to city.

that a regular curve

We ca nno t ther e f o r e expect

like the one show n exists.

reasonable to be l i e v e however,
eral shape,
point,

It seems

that a cu rve with that g e n ­

perhaps w i t h m o r e than one high net ec onomy

does exist.
Th ese a g g l o m e r a t i o n eco nomies

normally be re fl ected in the

and d i s e c o n o m i e s should

firm's p r o d u c t i o n costs.

If

the e c onomy was so o r g a n i z e d that the firms had to bear the
costs of a g g l o m e r a t i o n disecon omi es,

a fi rm facing a l o c a ­

tion decision m i g h t well expect its unit cost,
level of output,
it might choose.

to be,

in fact,

for a given

a f u n c t i o n of the ci t y size

We m i ght d i a g r a m a firm's expec t e d unit

cost curve in relation to city size w h i c h looks
net e conomy curve turned upsi d e down.

like Isard's

Such a d i a g r a m w o u l d

suggest the ex ist enc e of at least one b asic e c o nomic i n c e n ­
tive for firms not to locate in larger centers

than they

should and a like l i h o o d that an e c o n o m i c a l l y ef fic ien t
distrib uti on pa t t e r n w o u l d ar ise from their decisions.
Few peo ple w o u l d argue that the e conomy is so o r g a n ­
ized or that,

for example,

the discomfort to the p o p u l a t i o n

of living in a p o l l u t e d and n oisy city,
inals,

is taken into account

ov e r r u n w i t h c r i m ­

in the w o r k e r s w a g e scale.

It

is easier to ar gue that there are various kinds of e x t e r n a l ­
ities leading to a div e r g e n c e b e t w e e n pr i v a t e and social
accounts and, w i t h respect to the p r o b l e m d i s c u s s e d here,
to inefficient l o c a t i o n decisions.

This

is at least one of

42
J.M.

Neutze's

conclusio ns

in a book in w h i c h he examines,

theore tic all y and em p i r i c a l l y in the A u s t r a l i a n co n t e x t
and from an ef ficiency point of view,

the p r o p o s i t i o n that

the gov ernment w o u l d be j u s t i f i e d in p u r s u i n g a d e c e n t r a l ­
ization policy.

His

c o n clusion is sta t e d as follows:

"If

we could correct the impe rfections of the p rice m e c h a n i s m
to com p e n s a t e for external effects,

the result w o u l d p r o ­

bably be a less c o n c e n t r a t e d pat t e r n of loca t i o n "
1967,

p.

[Neutze,

27].

Neutze 's d i s c u s s i o n is interesting in the c onte xt of
this chap ter bec a u s e he emph asi zes

a distinction between

the internal and exter nal effects of l o c ation decis i o n s

in

c onj unction w i t h a d i s c u s s i o n of the a g g l o m e r a t i o n theory
we just reviewed.
suggests

Looking first at the exter nal

that a firm

given pl ace makes

(or family]

this p lace grow

effect he

de ciding to loca te at a
(by at least one family)

and this has a fa vor able or u n f a v o r a b l e effect on those a l ­
ready located there,

an ext erna l effect w h i c h is not taken

into acc oun t by the locati ng firm
to a numb er of ar guments

(or f a m i l y ) .

and some r o u g h m e a s u r e m e n t s

gesting that the effect of gr owt h on traffic,
ities,

He points

fares on pub l i c transport,

sug­

parking facil­

le ngt h of journ eys

to work,

costs of pub l i c servi ces and costs of p r i v a t e goods and
services
occurs

is less d e f a v o r a b l e or m o r e fa vorable if g r o w t h

in small rat her than in large centers.
"Where there are external d i s e c o n o m i e s from
growth they ap pea r to be more im por tant in

43
"large centers, w h i l e external econ omies appear
to be m o r e importa nt in small centers.
Con­
si d e r i n g on l y exter nal effects we ca n say that,
on balance, growth in small center s tends to
ma ke th em m ore p r o f i t a b l e pl aces to o p e r a t e and
mo re attr a c t i v e places to live, that is the e x ­
ternal economi es are m o r e im portant than the
external disecono mie s.
But w i t h growth the y
re ach a stage w h ere this is reversed.
Further
growth, on bal a n c e makes t h e m less a t t ractive
and less pr o f i t a b l e " [Neutze, 1967, p. 27].
Thus there a r e ' s u b s t a n t i a l

external be nefits

is d i v erted fro m large to small centers.
people alrea dy located in these centers

if growth

The firms and
gain as well as

those al ready locat ed in the large cent e r w h i c h is p r e v e n t e d
from be co ming larger.
Then N e u t z e looks at the inte rna l effect or the costs
of a loc ation d e c i s i o n to the loca ting
first no tes

firm and family.

He

the following:

"The fact that so much of A u s t r a l i a ' s p o p u l a t i o n
and econom ic growth is going to large cities is
a strong p r ima facie r e a s o n for b elieving that
d e c e n t r a l i z a t i o n w o u l d be u n p r o f i t a b l e to pr i v a t e
firms, the internal cost, on b a l a n c e b e ing hi g h e r "
[Neutze, 1967, p. 82],
One reas o n for this is:
"Small centers are m u c h less att r a c t i v e to m o s t
firms and families.
Th ey cannot o ffer the
large city employment, educational or r e c r e a ­
tional op po rtun ities, no r its supplies of c o m ­
pon ents and services and its large mar ket and
labor su ppl ies" [Neutze, 1967, p. 110].
W e have th erefore a counterpart to the external b e n e ­
fits of gro w t h of small centers.

If this gr owth tends to

44
make th em m o r e a t t ractive an d p r o f i t a b l e places
operate,

the agent c ausing it,

better off,

to live and

by m o v i n g in, w o u l d have b e e n

h a d he s e l ected a lar ger center.

Thus there are be nefits and costs
tion d e c i s i o n and,

as a result,

involved in a l o c a ­

in a d e c e n t r a l i z a t i o n policy.

The benefits ac cru e to those al r e a d y settled and r e m a i n i n g in
small an d large areas w h i l e the costs are borne by those d i ­
verted f r o m large to small centers.
take loc ation de cisions

S i nce m o s t p e o p l e do not

on the ba sis of the benefits

to others, w e can easily u n d e r s t a n d that
prefer large centers,

accruing

firms and families

a p r e f e r e n c e r e f l e c t e d in the growth

rate of the metros.
W e cannot argue that peop l e
they do.

Thus

are w ron g in lo cating as

far, we cann ot c o n c l u d e either that the total

settlement p a t t e r n arising fr om their decisi ons
centrat ed nor,

or course,

that a p u b l i c d e c e n t r a l i z a t i o n p o l ­

icy w o u l d be e c onomically justified.

It m a y be that such a

policy w o u l d not pr o d u c e a net social benefit.
if the external benefits
the internal

losses

is ove rly c o n ­

It w o u l d not

are tot a l l y or more than of fs et by

in profits

verted from la rge centers.

and real income to t h ose d i ­

This c ould be a s s e r t e d onl y after

a very careful and pre c i s e m e a s u r e m e n t of these be nefits and
losses.
Neu tze does c o n clude h o w e v e r that there is a net social
benefit to divert grow t h from large to i n t e r m e d i a t e - s i z e d
centers.

For him,

there are all reas ons to b e l i e v e that m o s t

of the a g g l o m e r a t i o n economies a v a i l a b l e in the largest

45

centers are a lready pre se nt in cente rs

of 500,000 and m a y b e

in centers of 200,000 people, w h i l e the d i s e c o n o m i e s are less
important and increa sin g less rapidly.'*'®

Thus,

the pe ople

diverted to these centers will not suff e r any loss and i m p o r ­
tant inc reased d i s economies will be avoided.

This sums to a

net social ben efi t accru s i n g to the p o p u l a t i o n remai n i n g in
the large centers.
We n o w summarize the part of ou r a r g ument re lat ed to
economies of u rban size w i t h a d i a g r a m m a t i c e x p o s i t i o n w h i c h
will sim u l t a n e o u s l y emph asi ze a strik ing d i f f e r e n c e b e t w e e n
Isard's and Neutze's

t reatment of a g g l o m e r a t i o n

(dis )economies

as well as lead us to ward an ans wer to the first q u e s t i o n we
addr essed ou rselves

at the b e g i n n i n g of this chapter.

Y o u will recall
curve was presented,

that,

a fter Isard's

total net eco nom y

we were t empted to draw another d i a g r a m

with his curve turn ed upsi d e down and to label it a f i r m ’s
expected unit cost cu rve in r e l a t i o n to city size.

Such a

curve w o u l d have a ssumed that all a g g l o m e r a t i o n diseco n o m i e s
are i n t ernalized to the firm in some way.
appropriate,

It seems m u c h mor e

as we did in Figure 2, to label this curve the

w hol e section of his boo k is d e v o t e d to an e m p i r i ­
cal ex a m i n a t i o n of that question.
We m a y add here that, in
the U.S., Gabler suggests a gr eater tendency towards d i s e c o ­
nomies of scale in cities over 250,000 p e o p l e [Gabler, 1971].
Halpern talks of en c o u r a g i n g the gro w t h of m i d d l e - s i z e d c o m ­
munities [usually 50,000 up, but as small as 25,000) [Halpern,
1970],
Epp reports that "it has b e e n sugge s t e d that the m i n ­
imum po int on the cost curves for such servi ces as w a t e r and
sewage treatment, education, p r o t e c t i o n services and cultu ral
amenities is re ac hed for a city o f be t w e e n 50,000 and 100,000
people" [Epp, 1970].

46
social cost of pro du c i n g one dolla r's w o r t h of goods and
services

and to draw another curve labele d the p r i v a t e cost

of produ c i n g one dollar 's w o r t h of goods and ser vic es
rela tio n to city size.

This

in

one embo die s Ne utze's d i s c u s ­

sion, s p e c i f i c a l l y his b e l i e f that i n t e r m e d i a t e - s i z e d cities
(point B) are more p r o f i t a b l e pla ces to o perate than small er
cities

(point A)

be c a u s e of a g g l o m e r a t i o n eco nomies and about

equally p r o f i t a b l e as lar ger centers

(point C) b e c a u s e most

of the a g g l o m e r a t i o n econo mie s have been r e a c h e d and the d i s ­
economies are external.

This does not n e c e s s a r i l y assume

that all a g g l o m e r a t i o n ec ono mies have be en re a c h e d in i n t e r ­
m e d i a t e - s i z e d cities,

nor that all d i s e c o n o m i e s are external.

A lthou gh he is not totall y expli cit on this point,
that his assumptions are that,

it seems

as the size of the city goes

from B to C, some n ew econ omi es ap pear but are offset by
some d i s economies w h i c h are internal to the firms
by truck drivers

in traff ic jams,

high e r rents,

(time lost

etc.).

This di a g r a m clear ly sugg est s w h y the total p a t t e r n of
location ma y be more c o n c e n t r a t e d than it sh ould be.

Firms

can locate in cities of size C w ithout su ffe ring the costs
they impose on society.

Firms have no p a r t i c u l a r inc ent ive

to locate in cities of size close to B,
socially mo re effi cient location.
incentives

al thoug h this

is a

Firms have econ omi c d i s ­

to locate in cities of size A, a l t h o u g h this migh t

be under ce r t a i n conditions,
largest net social benefits.
explanation.

the l o c a t i o n g e n e r a t i n g the
The

last po int ne eds

an

47
I
Cost

($)
Social

Private

A

B

Size of
city

C

Fi gure 2.
H y p o t h e s i z e d social and pr i v a t e cost of
pr oduc ing one dollar 's w o r t h of goods and servi ces w i t h
city size.
Neutze,

after his

c o n c l u s i o n that large net social

benefits w o u l d be p r o d u c e d if g r o w t h o c c u r r e d in i n t e r m e d ­
iate-sized centers, w o n d e r e d w hy the pric e m e c h a n i s m does
not p roduce m o r e of these centers w h i c h are not n u m e rous
A u s t r a l i a . 11

"The answer ," he suggests,

"seems

lack of c o o r d i n a t i o n of lo cation decisions.

in

to lie in

Si ngl e firms

and families ma y be lo ath to go to a small center,

but they

would go if they could be p e r s u a d e d that m a n y others w o u l d
go there too,

since this w o u l d m a k e the small cent er s i g n i ­

ficantly larger.
others,

Each of th em depends on b e ing close to the

and this applies not only to pri v a t e

government services

as well.

firms but

to

Even a gr oup of firms w o u l d

11He found support for his v i e w relat ed to the p riv ate
pro fit ability of these cen ter s in the fact that the few
existing in A u s t r a l i a are gr owing as fast as the largest
and have a good r e p r e s e n t a t i o n of mo re ind ust ries [Neutze,
1967, p. 104].

48
not be w i l l i n g to go to a small cen ter unless
that road,

rail,

power,

they knew

sewe rage and w a t e r w o u l d be provided.

But gov ernment au th orities are u n w i l l i n g to pr o v i d e

them

unless they k n o w that the gro w t h is go ing to take pl ace"
[Neutze,

1967,

p.

112-113].

N eu t z e be liev es that the lack of c o o r d i n a t i o n of l o c a ­
tion

de ci sio ns

is the most im portant

decentralization

in Australia.

factor p r e v e n t i n g

Th e so lution he emphasi zes

is to coo r d i n a t e and channel the deci s i o n s of seve ral firms
and families

towards

a limited n u m b e r of small centers

so

that "they can quick ly be m a d e into m e d i u m - s i z e d centers"
in o r der to red u c e or eliminate the intern al costs to those
diverted from the large centers

[Neutze,

1967, p.

104].

12

It is immed iat ely appar ent from the d i a g r a m above that if,
by such an action,

as ma ny firms and families c o uld be brought

into

a ce nter of size A as n e c e s s a r y

into

a ce nte r of size B, a net social be n e f i t

the o ther case w o u l d be created.
di seco nom ies

to "qu ickly" convert
larger than

it
in

This w o u l d a v oid in creased

in the lar ge centers,

without

imposin g losses

to th ose d i v e r t e d and at the same time it w o u l d add s u b s t a n ­
tial exte rna l benefi ts
center

to the firms

(and its hinterland)

and families of the small

converted

into a m e d i u m - s i z e d

center.

12

This has some r e s e m b l a n c e c o n c e p t u a l l y w i t h the
idea o f the new towns as b r i e f l y d i s c u s s e d by Sc hmi d in
relation to this investment c o o r d i n a t i o n p r o b l e m or what
he calls "problems in seq ue ntia l opt i m i z i n g " [ S c h m i d ,1968].

49
One m a y suggest here that

it w o u l d be interesting and

important to ha ve a p recise q u a n t i f i c a t i o n of Figure

2.

We

can ans wer simp ly that we do not have this quanti fic ati on.
We believ e the general

shape of the curves d rawn embodies

the g e n e r a l l y a c c e p t e d theories
and externali tie s,

of a g g l o m e r a t i o n ec ono mie s

a l t hough the cu rve s m ight not be so r e g u ­

lar p oint B m i g h t ex te nd over a r e l a t i v e l y w i d e range of
city sizes

and the p r i v a t e cost curve w o u l d at some point

also b egin to rise.

Much more

i n f o r m a t i o n w o u l d be neces s a r y

if the o b j e c t i v e was to d e s i g n a p r o g r a m to promot e the most
effic ien t p a t t e r n of location.
society's sole objective.

This

is not n e c e s s a r i l y

It is no t o u r 's here.

We simply

attem pte d to gat her a num b e r of s ound th e o r e t i c a l arguments
and o r g a n i z e them into a f r a m e w o r k from w h i c h can be exam ine d
the quest i o n s w i t h w h ich we are concerned.

13

The f ramework

helps us u n d e r s t a n d one reas on w hy an over l y c o n c e n t r a t e d
patter n of location m i g h t develop.

Let us tu rn to the next

question.

13

One m a y object that the f r a m e w o r k does not emb ody
and even conflic ts w i t h another well k n o w n theory:
Central
Place Theory.
Th e ex clu sive focus of this theo ry on servi ce
activities and the o t her drawb a c k s po i n t e d out by R i c h a r d s o n
reduce or eliminate its a p p l i c a b i l i t y to the con tex t we are
studying [Richardson, 1969, p. 62-65].
Fri edman also s u g ­
gests that the theory "seems, in fact, to be a p p l i c a b l e only
to the i n t e r m e d i a t e p e r i o d b e t w e e n the early h o m o g eneous
stage of develop ment and the m o s t a d v a n c e d stage chara c t e r i z e d
by the p h e n o m e n o n of co n t i n u o u s u r b a n i z a t i o n " [Friedman, 1956,
p. 219].

so
The L o c a t i o n Pa t t e r n of the Large st
M a n u f a c t u r i n g Corpor a t i o n s
M u e l l e r and M o r g a n rep ort the results

of an em pi rica l

i n v e s tigation c o n d u c t e d in M i c h i g a n in 1961 w h i c h indicates
that b o t h large and small

firms do not take l o c a t i o n d e c i ­

sions ex c l u s i v e l y no r even m a i n l y on the b asis of the set
of factors
1962].

i d e n t i f i e d by the theor ies

The 239 m a n u f a c t u r e r s

identify importa nt

in ter vie wed , w h e n a s ked to

lo cation factors,

tional costs and m a r k e t advantages.
ing the m to give the reas ons

[Mueller and Morgan,

e m p h a s i z e d the t r a d i ­
To the q u e s t i o n i n v i t ­

for t heir pr e s e n t

location,

the

most fr equently m e n t i o n e d an swe r was p e r s o n a l c o n s i d e r a t i o n s
and chance or accid ent ra ther than the co sts and m a r k e t
advantages

found in p a r t i c u l a r cities.

Why would Michigan manufacturers

in their ch oic e of

location give mo re we ight to their p e r s o n a l p r e f e r e n c e s
than to the results

of costs and mar k e t c a l c u l a t i o n s ?

the above theor eti cal

fram ework has any validity,

help us u n d e r s t a n d that.
a manufacturer

If

it should

It seems clear from Figure

2 that

looking for a site to b u i l d a p l ant has m u c h

room to a l l o w to his pe rsonal p r e f e r e n c e s

if the a l t e r n a ­

tives he co nsi ders are all cities of size B or larger.
is li kel y however,

that a num b e r of the m a n u f a c t u r e r s

It
inter­

viewed did select a site in a city size s m a l l e r tha n B on
the basis of his p e r sonal prefe ren ce.

W e m a y w o n d e r h o w he

could affo rd to m a k e a dec ision which,

a c c o r d i n g to our

theories,

is at his own ec onomic di sad vant age.

SI
There are at least two reasons wh y firms m a y no t m a k e
location dec isions

exactly along the lines s u g g e s t e d by the

theories reviewed.

One reason is that pr ofi t is not n e c e s ­

sarily the uni que nor the m a i n m o t i v a t i o n of firms.
Rich ard son em phasize s that point:
". . .just at a time w h e n loc a tion the o r y ha d
d e v e l o p e d to w h ere it was p o s s i b l e to c o n ­
struct a c o n cre te pro fit m a x i m i z i n g model,
m i c r o e c o n o m i c the orists in general w e r e b e g i n ­
ni ng to d i s p l a y grave doubts about the value
of pro f i t m a x i m i z a t i o n as a r a t i o n a l e for e n t r e ­
pren e u r i a l behavior.
It is an e m p i r i c a l l y
tes t e d fact that many firms p r e f e r to be
sited in r e g i o n A ra th er than r e g i o n B or n e a r
a g iven city rather than at an i s o l a t e d rural
location, rega rdl ess of the c o n g e s t i o n costs
i n c urred and no m a t t e r w h e r e the t h e o r e t i c a l l y
optimal site is to be found" [Richardson, 1969,
p. 91-92.].
Ric h a r d s o n also points
entrepren eur s may have:
long-run viability,

to a n u m b e r of o ther o b j ec tives

Sales m a x i m ization,

m a r k e t share, m a n a g e r i a l

are mo re r e l a t e d to size than prof itab ili ty.

s u r v i v a l or
salarie s w h i c h
He sugges ts

that firms ma y well no t attempt to m a x i m i z e anything.
this point he emp h asizes

the b e h a v i o r a l

On

sa t i s f i c i n g theories,

speci fic all y H e r b e r t Simo n's work:
"Simon has argu ed that managers r e c o g n i z e the
comp l e x i t y of calcu l a t i o n s re qui red and i m p e r ­
fections of data used in any o p t i m a l i t y c a l c u ­
lat ion an d for this rea s o n make no a ttempt to
m a x i m i z e profits or in deed a n y t h i n g else.
They
may set some m i n i m a l stan dards of a c h i e vement
w h ich they expect will insure the firm's long
run v i a b i l i t y and achie ve a reas o n a b l e level
of p r o f i t s " [Richardson, 1969, p. 99].

52

The au t h o r co ncluses
fying hypo t h e s i s
location.

that the m a i n limi t a t i o n of the s a t i s ­

is that it results

in an i n d e t e r m i n a c y in

Its c o m pensating a d v a n t a g e is to o f fer a rat ional

a priori e x p l a n a t i o n of location decision,
a ccom mod ate the envir o n m e n t a l prefere nces

e n a bling us to
like the access

to a m e t r o p o l i s or a fa vorable c u l tural and social milieu.
Bef o r e looking at the implicati ons of the a bove s t a t e ­
ment,

let us go one step further.

a "pe r f e c t l y c o mpetitive"

eco no my

It can be a r g u e d that in
firms w o u l d not have the

choice to strive for ot her th an pr of it ob jectives,
sati sfi cin g firm c o uld not exist.
maximu m profit,

In such an economy,

the

after payme nt of the co m p e t i t i v e r e m u n e r a ­

tion to all factors,
tion.

that the

is zero.

Thus

it is a survi val c o n d i ­

If firms can aff ord to a im at l imited objectives,

to

avoid cost comparisons b e t w e e n al t e r n a t i v e sites an d to
locate w h e r e

it pleases

their man agers

to live,

it is

becau se the real w o r l d in w h i c h they o perate is not the
"perfectly c o m p e t i t i v e " w o r l d of our models.
second reason wh y firms ma y not make
as t h e o r e t i c a l l y expected.

A n d here,

co ntrary to the p r e v i ­
and large firms,

to the doma i n of the large firms.

The locating firm of the a b ove theories

in its search

for an o p t i m u m location seek to m a x i m i z e profits,
product market,
of power,

is the

l o c ation decisions

ous argum ent w h i c h c ould a pply to b o t h small
we are b r o u g h t m o r e p r o p e r l y

This

g i ven the labor market,

w a s t e dispos al facilities,

g iven the

gi ven the a v a i l a b i l i t y

the fram e w o r k of tr an spor t

53
costs,

the sources of mat erial,

ation economies,
tion of costs

etc.

the a v a i l a b i l i t y of a g g l o m e r ­

G iven all these,

and mark e t advan tag es of a l t e r n a t i v e

will come c l o se to dic tat ing to the
location w h e r e

a detailed calcula­
locations

firm the v e r y spec ific

it will m a x i m i z e profi ts or simp l y survive.

In the economic th eor e tic w o r l d ver y few,
dimensions are u n de r the control

if any, o f these

of the firm.

Its eco nomic

environment is given.
W hil e this may have some r e s e m b a l a n c e w i t h the o p e r a ­
ting fr ame w ork of many small firms,

it he a v i l y co ntr ast s

with one of Galb ra ith' s d e scri ptions

of the b e h a v i o r of

the large corporation:
", . .in a d d i t i o n to d e c i d i n g w h a t the c o n sume r
will want and will pay, the firm must take
e very feasible step to see that wh at it decide s
to pr o d u c e is w a n t e d by the c o n s u m e r at a r e m u n ­
er ativ e price.
A n d it must see that the labor,
m aterials and eq uip ment that it needs wi ll be
a vai lable at a cost con s i s t e n t wi th the price
it will receive.
It must e x e rcise control
over what is sold.
It mu st exerc ise control
over w h a t is supplied.
It mus t replac e the
ma rket with plann i n g " [Galbraith,. 1968, p. 35],
While ma ny ma y di sagree w i t h m u c h of Galbraith's writings,
few pe ople co uld nega t e that he and other wri te rs

have p o i n t e d

to an important aspect of a m o d e r n

ind us tria l economy:

world of the large c o r p o r a t i o n has

li ttl e sim i l a r i t y wit h

the w or ld of perfe ct competi tion .

In the w o r l d of the large

corpo rat ion the economic e n vironment

is not a given.

firms have d e v e l o p e d far re aching powers over it.

the

Thes e

54
One of these powers

is the

at w h i c h they sell products.

p o wer to m a n a g e

This has

an impo rtant i m p l i c a ­

tion w hich rei nfo rces one of our prev ious
the p r e c e e d i n g section,
larger cent ers

they impose o n society,
mies are external.

conclusions.

we argu e d that firms

than they should,

the prices

wit h o u t

In

can locate in

suffe r i n g the costs

bec a u s e m a n y a g g l o m e r a t i o n d i s e c o n o ­

We c o n c l u d e d that this is a re as on why

the total pa t t e r n of l o c ati on may be m o r e c o n c e n t r a t e d than
it sh oul d be.

Here, w e can ar gue that the large st firms

could loca te in larger centers

than they should, wi t h o u t

suffering the costs they impose on society,
ation d i s economies w e r e

internal,

that

cost cu rve of Fi gu re 2 was ri sin g and

is,

even if aggomerif the pr i v a t e

(let us ass ume the

extreme) was at the level of the social cost of cities
a size larger than B.

The largest firms

c ould do that bec au se

they hav e the p o w e r to man a g e their prices,
set the price of their pr oducts

of

b e c a u s e they can

at a level co nsistent w i t h

their p r o f i t obje c t i v e and t h eir actual cost,

even if this

cost was hig h e r tha n it w o u l d be, were they loca ted elsewhere.
This

is a n o t h e r reason enabl i n g us to argue

that the total

pat tern of locati on m a y be m o r e c o n c e n t r a t e d than it sho uld be.
The c halleng e of the implicit p erfect c o m p e t i t i o n a s s u m p ­
tion of locat i o n theories has a nother im p l i c a t i o n re info rcing
the c o n c l u s i o n to w h i c h the c h a l l e n g e of the ass u m p t i o n of
profit m a x i m i z a t i o n also leads:
already discussed.

the i n d e t e r m i n a c y

Ev en the s a t i s f i c i n g

in location

firm in a high ly

55
co mpetitive eco nomy w o u l d be c o m p e l l e d to search for the
most pro f i t a b l e l o c a t i o n in or der to survive.
the case of the large firm.
given its power,

Such is not

The large firm, w e suggest,

its fi nancial strength,

control outsi de economic forces,

its ab i l i t y to

can m a n a g e no t only to

survive, but flour ish r egar dle ss of its location.
tion is,

to a large extent,

indeterminate.

an already deve l o p e d and prof i t a b l e

Its l o c a ­

It ca n loc ate in

industr ial c e n t e r as

well as in a less orga n i z e d sm a l l e r center.
It is also clear that in a less than hig h l y c o m p e titive
economy w h e r e larger than zero profits
tion of the small

are al lo wed the l o c a ­

firm is i n d e t e r m i n a t e as well.

need not aim for m a x i m u m p rofits to survive.

The ma n g e r s

Like the family

farm, w h e r e the man a g e r is an o w n e r - m a n a g e r , he m a y be s a t i s ­
fied w i t h

zero profits,

as well as less

r e muneration for his own resources.

than the c o m p e titive

This is p r o b a b l y one

reason why the manag ers of the small firms
Muel ler and Morgan,
the large firms,

to a greater extent

an swered that

i n t e r v i e w e d by

than the m a n a g e r s of

the choice of their

location

had been strongly in fluenced by their p e r s o n a l prefer enc es.
It. is impo rtant to empha s i z e n o w that our p r o p o s i t i o n
that the large firms can locate in small centers

is not ba se d

on a b e l i e f that their managers wi ll be sati s f i e d w i t h zero
profits or are in dif ferent to profits

or ev en will

products m a n u f a c t u r e d there at hig h e r prices.
of the large firms

cert ainly are not

sell the

Th e man age rs

indifferent to profits.

56
But they hav e the financ ial s t r e n g t h to plan for longer
periods.

They m a y be p r e p a r e d to s uppo rt t e m p o r a r y losses

one or a few of their plants.

in

Most i m p o r t a n t l y they are in

a p o s i t i o n to m a k e this locati on a m u c h m o r e pro f i t a b l e
place in w h ich to op e r a t e than w o u l d the small
there.

This

is b a s e d on aspects of the lo cation theorie s

review ed above,
but not their

whose assu mpti ons ha ve b e e n c h a l l e n g e d here

internal consistency.

These aspects
reviewed.

fir m l o c a t i n g

relate to the a g g l o m e r a t i o n theory

Both H o o v e r and Isard e m p h a s i z e that the d i s t i n c ­

tions m a d e be t w e e n the three types of "e conomies of c o n c e n ­
trated p r o d u c t i o n " they have i d e n t i f i e d are not as ne at as
appears.

Isard suggests that:

". . .analysis of u r b a n i z a t i o n eco nomies can be
said:
(1) to resemble, or (2) p a r t i a l l y evolve
from, or (3) even to contain, acco r d i n g to c e r ­
tain persons, the anal ysis of l o c a l i z a t i o n
e c o n o m i e s ."
And he adds a footnote:
"The dis c e r n i n g rea der m a y have alrea dy c o n c l u d e d
that in several respects there is also only a
fine line of d i s t i n c t i o n b e t w e e n locali z a t i o n
economies and ec onomies of scale" [Isard, 1956,
p. 182].
This is also Ho over' s p o s i t i o n w h e n he ma kes the st at ement
that the econo mie s of u rban c o n c e n t r a t i o n rest on the same
basic princ i p l e as those of the indi vid ual p r o d u c i n g unit:
multiples,

m a s s i n g of reserve s an d b u l k transactions;

these

are the pri nciples he singled out as sources of economies
of scale.

57
This has an im por tant co nse que nce .
large firm,

It means that the

given the size of the n e w inve s t m e n t

within a ne w location,

it can start

by itse l f creates some econ omi es of

co nc entrated p r o d u c t i o n or a g g l o m e r a t i o n economies.
economies,

These

that

the small investor w o u l d have to wa it

for,

are internal to

the large firm an d c o n t r i b u t e to m a k e

its

production,

at the b e g i n n i n g of its ope ration, m o r e p r o f i t ­

able than it w o u l d be for the small

inv est or lo cati ng

in the

same rela t i v e l y u n s e t t l e d area.
We find strong s u pport for this vi ew in a part of
Neutze's d i s c u s s i o n of the c o o r d i n a t i o n
and prese n t e d as one p o s s i b l e basis

issue m e n t i o n e d above

for a d e c e n t r a l i z a t i o n

policy w h i c h avoids or at least red uc es

the internal cost

to the firms d i v e r t e d from la rge to small centers.

He c o n ­

siders,

inter­

as an example,

dependent

firms

the case of a group of small

now e s t a b l i s h e d in a large city and

individually c o n s i d e r i n g a m o v e to anot her ce nte r and writes:
"In every other ce nt er the ra nge of indus try the
level of ind us tria l and p e r sonal serv ice s and
size of the local mark e t are m u c h less favorable,
and t h e r e f o r e no one firm in the group w o u l d find
it p r o f i t a b l e to decentral ize. . . .However, if
they all dec ide to m o v e they m ight all find it
profitable.
Whe re as the ind ividual fir m w o u l d
have no ap p r e c i a b l e inf luence on the p r o d u c t i o n
condi tio ns in the region, the w h ole gr oup would.
The em ployees and families of the gr oup would,
themselves, add c o n s i d e r a b l y to the size of the
local market, e s p ecially w h e n m u l t i p l i e r effects
had b e e n taken into account.
If a gr oup of
firms mo ves they c o u l d take wi th th em the parts
and co mponents sup pliers and the repa ir firms and
s ervice firms.
If local and central gov ern ments
p a r t i c i p a t e in the decision, pub lic service s will

58
"be available.
In short, c o o r d i n a t i n g the l o c a ­
tion decision s of the group i n ternalizes the
p e c u n i a r y external effects, and the gr oup
d e c i s i o n is m o r e li ke ly to m a x i m i z e c ommunity
w e l f a r e " [Neutze, 1967, p. 32-33].
N e u t z e ’s a r g ument is in favor of the c o o r d i n a t i o n of
the investments of a group of small

inte r d e p e n d e n t

But wh o w o u l d argue that General Mot o r s

firms.

or a nother large

firm does not coo r d i n a t e as "la r g e b l o c k s " of i n t e r d e p e n ­
dent inv est ments

as 25 or 50 or even 100 small

firms?

Who

would suggest that an inve s t m e n t of the size one large firm
can make in an area wi ll ha ve no " a p p r e c i a b l e infl uen ce" on
the p r o d u c t i o n condi tio ns
that the large firm,
plier of parts,

in that cen te r?

W e w o u l d argue

w h i c h is ofte n or can be its own s u p ­

components,

the size of the inv est ment

re pa ir and o t h e r services,

given

it can start w i t h i n an area,

does

coo rdin ate very large amou nt s of i n t e r d e p e n d e n t

inv estment

and does i n t e r nalize m a n y of the p e c u n i a r y exte rna l

econom ies

for w h i c h small firms have to wa i t . * ^
Our c o n c l u s i o n t h e r e f o r e

is that the large firm can

locate and f l o urish in a small center,

if that happe ns to be

Holis Ch enery also sugge st s that one w a y to c o o r ­
dinate inv estm ent deci s i o n s and to in t e r n a l i z e p e c u n i a r y
external economies is to e n l a r g e the scale of the p rivate
decision unit [Chenery, 1959, p. 114].
Neut z e reports a
statement from Scito v s k y to the effect that p e c u n i a r y e x ­
ternal ec onomies justify p l a n n i n g of economic d e v e l opment
but are less im portant in d e v e l o p e d co unt ries w h e r e there
are large and high l y inte g r a t e d firms [Neutze, 1967, p.
34] .

59
(or can be made)
structure."

1s

the l o c a t i o n p r e f e r e n c e of its "techno-

In other terms,

the ch oic e of l o c a t i o n of the

large firm is r e l ativ ely free vis- a - v i s the b asi c loc ati on
factors

identi fie d by the theories.

W e will argue in the next

sect ion that the d e c i s i o n

of such a firm to locate in a small area,
the app rec iab le

in addition to

influence it c e r t a i n l y has by itse l f on the

production cond iti ons

in the area, may have an influ e n c e on

the locatio n d e c ision of ma ny other firms.

This will

rein­

force the first effect an d ma y s u b s t a n t i a l l y m o d i f y the
global p icture of the g e o graphic d i s t r i b u t i o n of economic
activities.

Be for e reach i n g that point, we m u s t discuss

briefly a few more questions.
The above con clusion can,

of course, be e x t e n d e d to

suggest that the choice of locatio ns

of the large m a n u f a c ­

turing c o r p o r a t i o n is also r e l a t i v e l y free vis-a-vis

the

policy tools derive d from the t he or ies and u s e d by pub lic
authorities
tools

to att ra ct

firms in small centers.

One of these

is pub lic spen din g to improve the i n f r a s t r u c t u r e

water supplies,
small center.

sewage facilities)
A fav orable

exists in large centers.
small centers

(roads,

and the m a n p o w e r of the

indust rial

i n f r a s t r u c t u r e a lready

The p u b l i c invest men ts m a d e in

simply tend to d e c r e a s e their disad van tag es.

^ T h i s p r e f e r e n c e may rath e r be for the cities w h i c h
already have a football or baseb all team, a large airport,
a symphonic orchestra, etc.

60
They cannot be an important

fa cto r a t t r a c t i n g the larg e

firm w h i c h anyway ca n r e asonably expect that s uch i m p r o v e ­
ments w o u l d be made,

either b e f o r e or af ter its d e c i s i o n to

locate in the center.
A n o t h e r tool
loans,

is to o f f e r fina nci al

tax re ductions,

direct subsidies,

at the begi n n i n g of its operations.

special

to assist the firm

To sugge st that this

is a de t e r m i n a n t l o c a t i o n fact or for the
assume that,

advantages,

large fi rm w o u l d

in the p l a n n i n g of investment s that w i l l

years and years,

last

it gives a v e r y large impo r t a n c e to short

term ad vantages which, we have suggested,

are not cr itical

consider ati ons

This does not

mean that the

to the locat i o n decision.

firm will not m a n a g e to let peop l e b e l i e v e

these a d v antages are ve ry im portant w h e n n e g o t i a t i n g them
with a local authority,
or another,

sense.

dec id ed, for one re as on

to locate an estab l i s h m e n t

One w o r d about
the small

if it has

firms.

in a small center.

the p o s s i b l e impact of these tools on

Let us note first that they m a k e muc h

If we re fer to our Figure 2 and c o n sider the case

of a cen ter of size A, w h e r e the adv ant age s m a y be offered,
we ca n see that they con t r i b u t e to a r e d u c t i o n of the p r i v a t e
cost of p r o d u c i n g goods towa r d the level that p r e vails
larger centers

(B or l a r g e r ) .

to re duc e the costs u n der this

in

Unless

en oug h m o n e y is invo lve d

level,

the adv antages g ranted

simply w i d e n the range of ci ty sizes over w h i c h the firms
can apply their loca tion al pr eferences.

If only a few small

61
firms w i t h no " a p p r e c i a b l e
ditions of the center,

in fluence" on the p r o d u c t i o n c o n ­

ha v e b e e n att racted, w h e n the t e m p o r ­

ary advanta ges are removed,

they p r o d u c e at h i g h e r costs

than if they had s e l e c t e d a lar ger center.

This is w h y we

argue that these tools are w e a k means w i t h w h i c h to pro m o t e
an important d e c o n c e n t r a t i o n movement.
We have to emp hasize final ly that the argum e n t d e v e l o p e d
in this s e c t i o n is l imited to the loc ation p a t t e r n of the
large m a n u f a c t u r i n g firms by o p p o s i t i o n to the large service
firm.

Intuitively,

it seems v e r y u n l i k e l y that Sears and

Roebuck c o u l d su c c e e d at or even th ink of op e n i n g a retail
store emplo y i n g a t h o usand emp loye es
tled a r e a . ^

in a r e l a t i v e l y u n s e t ­

The rea son is that mos t of the articles sold

by the Lansi ng Sears store are sold to reside nts of the
¥

Lansing area.
Lansing

On the contrary,

(19,000 employees)

Aircraft in Su nn yvale,

output,

(29,000 employees)

and even the world.

are

For these

the prox i m i t y to a give n s p e cific large market,

which ma y absorb
ment

in

or the air pla nes b uil t by Lo ckheed

California

sold thr ou gho ut the U.S.
establishments

the cars built by G.M.

a very small p r o p o r t i o n of the e s t a b l i s h ­

has little o v e r a l l si gni ficance.

in the second part o f this section,
to the ma rke t as a l o c atio n factor.

This

is wh y

we pa i d lit tle att e n t i o n
This is also proba b l y

1(*To do that, Sears w o u l d h a v e to rely on mail in
orders for the w h o l e or most of its busines s w h i c h implies
a ve ry im portant and u n l i k e l y chan ge in the shopping habits
of most consumers.

62
what has b e e n fo rg otten by c e r t a i n the ori sts w h o ar gue that,
with the im provement of t r a n s p o r t a t i o n and communi cati ons ,
which reduces
materials
market

the impo rta nce of the source of supp ly o f raw

as a locati on factor,

the p r o x i m i t y to a large

has bec o m e a d o m inant l o c a t i o n factor.

For a d i s c u s ­

sion of this argume nt see Es tall an d Buchanan,
this was

true for every type of firm,

an origin al feature.

27].

A c o n c e n t r a t i o n of indus try at one

The p o s ition throws

cess by w h i c h a mark e t becom es
it starts

This argum ent

is o f t e n more a d e r i v e d than

point creates a mark et at that p o i n t ”
1966, p.

If

one wo nde rs ho w the

settlement patter n could ever be modified.
seems to forget that "a mar k e t

1966.

from scratch.

[Estall

and Buchanan,

little light on the p r o ­

large and even less on h o w

M arke ts

once start fr om scratch.

The Large M a n u f a c t u r i n g C o r p o r a t i o n
and A r e a Gr owth
At one point in time,

in the h i s t o r y of this country,

California ha d a very small p r o p o r t i o n of the total p o p u l a ­
tion and Los A n geles was a very small city.

Today,

California

is the largest st ate and Los Angele s the se c o n d l argest city
in the Un it e d States.

What acc oun ts

for such chan ges

in

the d i s t r i b u t i o n of the p o p u l a t i o n and econom ic acti vities
and the v a r y i n g state or area grow t h rates u n d e r l y i n g

these

changes?
Could it be that the m a r g i n a l p r o p e n s i t y of some
people to consume,

save,

invest,

export and import

in some

63
states and areas

is very diff e r e n t fro m that of the rest

of the countr y?

This

w ould suggest,

is wha t

since these are the b a s i c elem ent s w h i c h

determin e in these mo del s
and Ri ch a r d s o n argues
growth

[Richardson,

these factors

t r a d i tional gro w t h mo dels

the rate of grow t h of the c ountry

that they c o uld be a p p l i e d to regio nal

1969,

Ch.

13].

In the pr e s e n t analysis,

and models are discarded ev en wi t h o u t d e s c r i p ­

tion for two reasons.

We do not b elieve these varia b l e s can

be so diffe r e n t fr om one regi o n to another,
of a regi o n to the other,
area growth rates.

from one are a

to cre a t e large differences

Even if they were,

difficult to test such mod els

in

it w o u l d be v e r y

since it w o u l d require very

detai led area accounts w h i c h are not available.
Is it p o s s i b l e that some regi ons and areas are grow ing
very fast because large n umb ers of sk i l l e d wo r k e r s w i t h
their families m o v e into these areas

to c o n s t i t u t e

reservoir of q u a l i f i e d labor w a i t i n g

idle the fo rtun ate

event that a firm,

aware of t heir presence,

the area and hire them?
Ou r thesis

This

a large

be a t t r a c t e d to

seems v e r y ‘u n l i k e l y .

is rather that areas gr ow or d ecline be c a u s e

of the d e c i s i o n of large e nterprises to locate m a n u f a c t u r i n g
establishments or exp and their p resent fa ciliti es
areas ra ther than others.

in some

We argue that this d e c i s i o n has

a far reac hin g influence not only on the im med iate p r o d u c t i o n
conditions of the areas but also serves
satellite firms and in dustries

as an impulse for

to locate there,

w h i c h results

64
in a high gr owth rate.
leaders, w h i c h means

We call these large firms

l o c ati on

that they p r e c e e d or at least can pre-

ceed p o p u l a t i o n into an area and ge nerate changes
tion and eco nom ic activities d i s t r i b u t i o n pattern.

in p o p u l a ­
This

concept we have a dapted from Es tal l and B u c h a n a n giv ing it
in part some additional meaning.
". . .we have as yet a t t e m p t e d no e x p l a n a t i o n
of h o w the genera l pa t t e r n of d i s t r i b u t i o n of all
industry in a. co unt ry m i g h t arise, i.e., h o w
the p a t t e r n of d i s t r i b u t i o n of the entire i n d u s ­
trial p o p u l a t i o n emerges a nd why it is as it is.
There are in p r a c t i c e c e r t a i n fundament al i n d u s ­
tries that are so important in their n umbers of
employees, or in the n u m b e r s an d types of
industries 'linked* w i t h them, that they tend
greatly to inf lue nce the m a i n features of the
d i s t r i b u t i o n of in dustrial emp l o y m e n t generally.
Such m a j o r indu str ies we m a y call the 'location
leaders'.
T hese are the ind ustries on w h i c h a
mode r n i n d u s t r i a l i z e d c ount r y ' s p r o s p e r i t y is
usu a l l y based, and we m a y in stance the iron and
steel industry, h eavy en gin eer ing , the h e a v y
chemical industry, oil refining, ai rcraf t m a n u ­
facture and aut o m o b i l e p r o d u c t i o n ..............
"These are the type of ind ustries that p r o v i d e
the framewo rk for the g eneral p a t t e r n of i n d u s ­
trial di st ribution.
They are large and i m p o r ­
tant empl oyers o f labour, w i t h all . t h e a s s o c i ­
ated advantages that this offers to o t h e r
industries in their area; they p r o v i d e a high
p r o p o r t i o n of earn ing (and t h e r e f o r e spending)
capacity; they c o n t r i b u t e s i g n i f i c a n t l y to the
nati ona l total of v alue a dded by m a n u f a c t u r i n g
industry; they are ind ustr ies in w h i c h a c o n ­
sider a ble p r o p o r t i o n of total ne w in vestment
takes p l a c e .........................................
"The ir leading role also arises n a t u r a l l y f r o m
the fact that th ey of ten p r o v i d e the r aw m a t e r i a l s
for, or use on an immense s c a le the pro du cts
of, ot her industries a n d t herefore p o w e r f u l l y
attract them.
It w o u l d be d i f f i c u l t to fi nd an
industrial process that did not u s e in some w a y

65

"the p r o d u c t s of the iron and steel or chemi cal
industries, w hile many firms exist p a r t l y or
entir ely to provi de parts for use in the m a j o T
ass em bly industry e s t a b l i s h m e n t s .................
"Further, the pa t t e r n set by the loc ation leaders
is often r e i n f o r c e d by the fact that m a n y o c c u p a ­
tions and pro ces ses not e s s e n t i a l l y 'linked' with
them are nevert h e l e s s a t t r a c t e d to the same l o c a ­
tions by the c o n c e ntration of indus tri al emplo ymen t
there and by the gene ral economies of c o n c e n t r a ­
tion that are available.
They thus form the main
nodes round w h ich great industrial complexes
have d e v e l o p e d and they provi de the u n d e r l y i n g
r a t i o n a l e of the geogr a p h y of industrial a ctivity"
[Estall and Buchanan, 1966, p. 146-148].
The authors have been tal kin g thus far of leading
industries

rath er than of leading firms.

But is is obvious

from their c o n c l u s i o n that they mean bo th since t heir l e a d ­
ing indu str ies

are cont r o l l e d by the largest firms as the y

themselves realize:
"Our thesis here, then, is that there are e n t e r ­
prises of large sc ale w hich c o m prise the f u n d a ­
m e n t a l industries and service s in an indus tri al
econo my and are the p a t t e r n formers of the
general d i s t r i b u t i o n of indus tr y and of the
industrial population. 7 Many small er (an some
n o t - s o - s m a l l !) indus tri es tend to fol low the
p a t t e r n set by the leaders, for tKeir own
o p t i m u m l o c ation occurs in prox i m i t y to them,
e nsuri ng the a v a i l a b i l i t y of m a t e r i a l s or
labour or marke ts or services, or all c o m bined."
T hes e quo t a t i o n s

indicate the m e a n i n g these authors

give to the concep t they are d i s c u s s i n g . . L o c a t i o n leaders,

17

They si ngle out one specifi c servi ce as a p o s s i b l e
location leader, the p rovision of a large port.

66
becaus e they are key elements
relationships,

in a n u m b e r of i n t e r - i n d u s t r y

att rac t o t her firms and industries w h e r e they

locate an d thus are "p at tern forme rs" of the d i s t r i b u t i o n
of industry and the indust ria l labor force.
Our c o n c e p t i o n o f a l o c a t i o n leader includes
aspect o f course,

but it is broader.

the la rge m a n u f a c t u r i n g c o r porati ons
accounting

Our h y p o t h e s i s

that

are the m a j o r factor

for area gro w t h d i f f e r e n t i a l s

singular causal

this

also asserts a

importance b e t w e e n the d i s t r i b u t i o n of

sec ondary i ndu st ry a c t i v i t y and that o f overal l e c o nomic
activity

inc luding the servi ce industries.

Our leaders are

" patt ern for mers " of the d i s t r i b u t i o n not only of in dustry
but of eco no m i c act ivit ies generally.
Estall and B u c h a n a n come v e r y close to s u g g e s t i n g some
reasons for this view w h e n they m e n t i o n that m a n y o c c u p ations
and proc esses

not es s e n t i a l l y l i n k e d to the leade rs are

att racted to the same l ocat i o n because of the ec ono mie s of
c o n c e n t r a t i o n that are available.

Even more

i m p o r tantly

they me n t i o n that the leaders pr o v i d e to an area an i m p o r ­
tant source of earn ing and spending capacity.

For us,

this

earning and sp en ding capac i t y is n e c e s s a r y if an area is
going to d evelop s ervi ce activities.

It is hard anyway

to ima gi ne how a c ommunit y could g r o w and even be m a i n t a i n e d
if all its members w e r e o c c u p i e d
each other w hile
clothing,

in p r o v i d i n g servi ces

imp orting from other areas

en ergy supplies,

cars,

etc.

its food,

It w o u l d rapid ly

to

67

face an u n t e n a b l e balance of p a y m e n t s deficit
cou ntry doing the same thing would)
shrink the community.

18

This

(just like a

w h i c h w o u l d r apidly

idea that m a n u f a c t u r i n g or

export industries pr o v i d e the base for the d e v e l o p m e n t
area of a v a r i e t y of ot her act i v i t i e s
basic or service activities)

in an

(nonexport or non-

is not new.

It has bee n

fo rma lized in the econo mic base the o r y of r e g ional growth.
Desp ite the limi t a t i o n of the m e t h o d o l o g y u s e d to c ompute
m u l t i p l i e r effects

and make emp l o y m e n t predic tio ns,

the

idea it sel f w o u l d app ear to h a v e great validity.
One m a y object that the above argum ent gives far too
much imp o r t a n c e to m a n u f a c t u r i n g as a de t e r m i n a n t of p o p u l a ­
tion and eco no mic a c t i v i t y d i s t r i b u t i o n and of ar ea growth.
There are in dications

that this

imp o r t a n c e is justified.

P erloff and others have found a c o r r e l a t i o n of

.936 b e t w e e n

each state's s hare of m a n u f a c t u r i n g em ployment and each
state's share of p o p u l a t i o n

[Perloff and Dodds,

1963, p.

69].

Chinitz and V e r n o n have found a "m a r k e d co n v e r g e n c e in the
ratio of m a n u f a c t u r i n g emp loy men t

to p o p u l a t i o n among the

different regions of the c o u n t r y towa rd some c om m o n nati ona l
ra tio s”

[Chinitz

and Vernon,

1960,

p.

127].

Therefore,

the

re d i s t r i b u t i o n b e t w e e n areas of m a n u f a c t u r i n g em ployment of
a country,

even if it is growi ng rela t i v e l y sl owly can give

hope to la gg in g areas.

18

This w o u l d be true unle ss im por tant sources of
income from g o vernment tra nsfe rs flow into the area.

68
This does not m e a n that a g ive n area cannot g r o w
its m a n u f a c t u r i n g empl o y m e n t does not

increase.

with im por tant r e c reational an d tourist re so urces

if

A n area
or w h i c h

happens to be s e l e c t e d for the e s t a b l i s h m e n t of a state or
federally supp o r t e d edu cat ion al or m i l i t a r y institution or
a federal a d m i n i s t r a t i v e cent er can grow qu ite fast.

19

These

activities have an import ant com mon c h a r a c t e r i s t i c w i t h m a n ­
ufacturing:
sense that

they are export indus tri es

in the specif ic

income from o ther areas in some cases fr om all

over the country,

flows

into the area and re presents an

important spe nding c a p a c i t y avai l a b l e to deve lo p an d support
a va r i e t y of o ther local activities.
It is ap p r o p r i a t e at this point to bring our d i s c u s ­
sion a little clos e r to an im portant as pec t of the rec eive d
area gr owt h theory:

19

that re lated to the gro w t h cen ter concept

T h ese types of va ria bles we re not inclu ded in our
model.
They came to our m i n d as an after thou ght , once the
model was elaborated, the data ga thered and processed.
One
can argue that it is not that impor tan t to include them.
First the b a sic hyp o t h e s i s we w i s h to test does not relate
to these v a r i a b l e s . T h e ir effect sh ou ld appe a r in the
residuals.
Second, even if some rural areas might have good
tourist p o s s i b i l i t e s , it does not seem that m u c h effort has
been ma de to exp loi t them an d the ref ore it is p r o b a b l y
hopeless to at tem pt exp l aining past gr owth rate d i f f e rentials
with a v a r i a b l e m e a s u r i n g these po ssibil iti es.
As to the
other variab les , Irwin already a t t e m p t e d to explai n p o p u l a ­
tion gr owt h rate d i f f e rentials b e t w e e n n o n m e t r o p o l i t a n
counties w i t h a m ode l inclu din g d u mmy v ariables account ing
for the p r e sence of a college, a m i l i t a r y institution, the
prese nce of a freeway.
T h e s e v ariables we re signif icantly
differen t from zero but the R2 was .09 and the author c o n ­
cluded that his results were d i s a p p o i n t i n g as to p r o p o r t i o n
of v a r i a n c e expl a i n e d [Irwin, 1972].

69
or Francois P e r r o u x ' s

fpole de d e v e l o p p e m e n t * and

croissance'

1955],

[Perroux,

concept provi des
what acc oun ts

’pole de

R i chardson's d i s c u s s i o n of this

us w i t h several po int s of s i m i l a r i t y b e t w e e n

for the exis tence of a gro w t h ce nter an d our

concept of lo cation leaders.

He poi nts

out that:

"Re gional e x p a n s i o n takes place. . .because of
interaction b e t w e e n key indus tri es at the pole.
These indu str ies are cal l e d 'propulsive i n d u s ­
tries' and they form the n ucle us of the d e v e l o p ­
ment pole. . . .They tend to be hig h l y c o n c e n ­
trate d an d u s u a l l y sell to n a t i o n a l markets.
Th ey ha ve m a r k e d m u l t i p l i e r and p o l a r i s i n g
effects on the reg i o n in w h i c h they are sit uated."
He also emph asi zes

that ec ono m i e s of s cale and a g g l o ­

me r ation economi es are the "m ajor p o l a r i s a t i o n forces" at
the gr ow th point.

He suggests that the key ind ustr ies are

"probably export i n d ustries, " that they " increase the e f f e c ­
tive demand" of the area,

that g r o w t h point the o r y " i m p l icitly

draws upon the export base c oncept."

He fina l ly en umerates

a large n u m b e r of s ervice ac tivities w h i c h are d e v e l o p e d at
the pole,

either bus ines s services or services

for the p o p ­

u lation of the g r o w t h point and its su r r o u n d i n g area
1955,

p.

[Perroux,

415-428].

All this

seems v e r y s imilar to wh at we have p r e s e n t e d

as eit her the ch aracteristics or the role of the effect of
a locatio n le ad er in an area.

It is p r o b a b l y right to s u g ­

gest that the p r o p u l s i v e indu str ies

(firms) w h i c h form the

70

nucleus of the de v e l o p m e n t pole ar e n o t h i n g else tha n o ur
location leaders.

20

We h a v e to e m p h a s i z e n o w the reason w h y ou r c oncept of
location leaders
corporations.

is a p p l i e d only to the largest m a n u f a c t u r i n g

It can be arg u e d that a ny fir m o p e n i n g a

large esta b l i s h m e n t in a small area m a y serve as a locati on
leader and stimulates the gro w t h of the area.
re aso nable to expect this result.
the result can be e x p e c t e d if,
succeed in ope rating

It is c e r t a i n l y

We must add however,

an d onl y if,

its establishment.

tha t

the firm does

It is m u c h less

certa in that any fi rm ca n do that.
One rea s o n is c o n t a i n e d
cussion.

Let us repeat

in a part of our p r e v i o u s d i s ­

and r e e m p h a s i z e this point,

since

this is one o f the central ar guments of this chapter.
large firm,

b e c a u s e it has fi nancial

of the n ew in vestment
it is, or can be,

strength,

The

g i ven the size

it c a n start w i t h i n a n e w area, b ecause

its own s u p p l i e r of parts,

components,

repair and o t h e r services, b e c a u s e it coo rdin ate s v e r y large
amounts of int erde pendent

20

investment,

does create by itself

One d i s s i m i l a r i t y m a y be n o t e d here.
Rich a r d s o n
distin gui she s b etween natu ra l and arti fic ial gr owth points.
Natural g r o w t h points ar e foun d at " s u bstantial p o p u l a t i o n
centers w i t h i n high l y d e v e l o p e d r egions."
Artificial growth
points "co u l d be cre a t e d almost an ywhere if p o l i c y makers
were w i l l i n g to pump in en ou gh r esources in the f orm of
public inv est men t in i n f r a s t r u c t u r e and s u b sidies" [Richardson,
1969, p. 416].
Our thesis is that the largest m a n u f a c t u r i n g
firms are in a be tter p o s i t i o n than p o l i c y ma kers to act as
loca tio n leaders or to ini tia te the p u m p i n g into a r e l atively
un s e t t l e d area of the res ources need e d to create a grow th
point.

71
and internalize econ o m i e s of c o n c e n t r a t e d pr oduction.

This

is one sou rce of its abi l i t y to su c c e e d w h e r e others w o u l d
fail.
The large fi rm has o t her c h a r a c t e r i s t i c s we have not
m e n t i o n e d yet w hich are of c r i tical i m p ortance
discussion.

The la rge m a n u f a c t u r i n g firm has a high l y

articulated marketing
channels,

in the pr e s e n t

or ganization,

w e l l - d e v e l o p e d market

it has a na me and b r a n d names w h i c h ar e known,

has a m a r k e t

share of w h i c h

it is p roud and th at it protects.

The large st firms t a k e n t o g ether have a high m a r k e t
almost all the m a j o r markets.
it is increasing.

The firms

it

This

share of

share is not decreas ing ,

are not

indifferent to this

fact and they have some p ower to react

if that share is

threatened.
Let us consider,
As sume

as an example,

that a m a n of good will

is anxious

the auto industry.

in M i c h i g a n * s U p p e r Penin s u l a

to de v e l o p a large cent e r that will br ing to this

area not on ly m o r e jobs but the abundance,
versit y of services peop l e of ot her areas
the auto industry,
Michigan,
Peninsula.

qu a l i t y and d i ­
enjoy.

He be lieves

w h i c h has do ne so m u c h for Sou thern

is the n u m b e r one pr ospe ct to do that for the Upper
He conc e i v e s the idea to open a hu ge car assembly

plant to employ,

af ter some training,

all the u n e m p l o y e d and

u n d e r e m p l o y e d of his area as well as th ous ands of others.
What

is the l i k e l i h o o d he wi ll tr y to r ealize his project?

Let us assume he does.

If he has

the m o n e y or can bor r o w it,

72
he can of cou rse bu ild the plant.

H o w m a n y cars w i l l he

pro duce and for ho w long if the curre nt four m a n u f a c t u r e r s
decide they wa nt to ke ep a h u n d r e d p e r c e n t of that m a r k e t ?
On e can p erh aps an swer this q u e s t i o n in d i f f e r e n t ways.
We leave it as a question.
hypothet ical

However,

the idea b e h i n d the

exampl e leads us to ar gue that the trend towards

the geog r a p h i c c o n c e n t r a t i o n of e c o n o m i c act i v i t i e s m a y not
be u n r e l a t e d to the trend towards

the c o n c e n t r a t i o n of the

control of economic acti vi ties w i t h i n the ha nds of the
largest corporations.

It also leads us fo rmally to h y p o t h e s i z e

that the l o c ation pa tt ern of th ese c o r p o r a t i o n s

is the d o m in ant

factor acc o u n t i n g for area gro wth di ffe rentials.
In this chapter, we have r e v i e w e d and d i s c u s s e d a
number of im por tant locatio n and area gro w t h theo rie s

in an

attempt to de v e l o p a theoretical base to u n d e r s t a n d b e t t e r
how an ov erly c o n c e n t r a t e d p attern of l o c at ion m a y de v e l o p in
a country,

to u n d e r s t a n d the reaso ns w h y the a p p r o a c h f o l l o w e d

thus far in m o d i f y i n g

this p a t t e r n are ina dequate and to

support the n e w a p p roach e m b odi ed in our basic hypothesis.
Let us e xamine n ow the m e t h o d o l o g y we have d e s i g n e d to
perfor m a small scale test of this hypothesis.

CHAPTER III

METHODOLOGY
The D e l i n e a t i o n of Areas
Th e d e l i n e a t i o n o f areas ad o p t e d in this

r e s e a r c h was

used by the E c o n o m i c Res ear ch Se r v i c e of the U.S.D.A.

in a

study w hich built

for 1960 an index of economi c de vel opment

to rank the areas

[Galbraith,

1968].

States into 489 m u l t i - c o u n t y areas,
Areas

It divid es the United
cal l e d B a sic T rading

(BTAs).^
As expla i n e d in the ERS report,

areas closel y app r o x i m a t e

func tio nal

“ these m u l t i - c o u n t y
econo m i c areas

sense of hav i n g a d o m i n a t i n g c entral city that

in the

influences

both the immedi ate u r b a n area as well as the surrounding
rural area.

In most cases,

re sidents of the rural areas

live w i t h i n co mmu t i n g d i s t a n c e of the central cities
et a l . , 1961,
This
purposes

p.

[Edwards,

9] .

area d e l i n e a t i o n has s ever al adv a n t a g e s

in this research.

for our

It uses the cou n t y as the build ing

block for each area w h i c h facilitates

21

the use of se con dary

The d e l i n e a t i o n has been m a d e by the Rand McN a l l y
C o r p o r a t i o n w h i c h publis hes a num b e r of tr ade and market
information on these areas in its Com m e r c i a l Atlas and
M a r k e t i n g Gu ide [Rand McNally, 1970].

73

74
data.

The do m i n a t i n g cent ral city has bee n s e l ected and the

county g r o u p i n g d e t e r m i n e d on the basis of the imp o r t a n c e of
ex hibited sho ppi ng r e l a t ionshi ps b e t w e e n the c e n t e r and its
hinterland.

Th e d e l i n e a t i o n sh oul d c o r r e s p o n d reas o n a b l y

well to the c ommuting faci lit ies w i t h i n the area.

Therefore,

the area can be c o n s i d e r e d also as an a p p r o x i m a t i o n of a
labor mar k e t area,

p r o b a b l y the most ap p r o p r i a t e un it of

ob s e r v a t i o n w i t h i n w h i c h to ex am ine the in fl uenc e a firm
may have on its surroundings.

Finally,

the d o m i n a t i n g

central city of those areas w h i c h are small and,
suggest,

one m a y

in need of growth and development, m i ght e v e n t u a l l y

serve as the focus of a p u b l i c d e c e n t r a l i z a t i o n policy.
This w o u l d follow our line of a r g ument in Chapte r II,

r elated

to the d i v e r s i o n of gro wth fr om cent ers of size C to centers
of size A as d e s c r i b e d in Figure
in line w i t h the argument,

2.

in C hapter

growth of a limit ed num b e r of cent ers

It w o u l d also be tot al ly
I, re l a t e d to the
in rural areas servi ng

as an indu str ial p r o d u c t i o n and ser vice center for the
hin t e r l a n d rural population.

22

The d e l i n e a t i o n has l i m i t ations however.
are aggreg a t i o n s of counties.

22

Th e BTAs

T h eir bou n daries are those

Eli m i n a t i n g from the 4 89 BTAs those w i t h an a lr eady
large central city (and p o s s i b l y those w i t h an i n t e r m e d i a t e ­
sized center) we w o u l d be left w i t h a small n u m b e r of areas
"in n e e d of growth", a number c o n t r a s t i n g s harply w i t h the
14,557 small towns and v i l lages w h i c h m i g h t be the focus
of a d i s p e r s e d sett l e m e n t policy.

75
of the counties

included.

di v ision of a territory.

But coun tie s
One cannot

are adm i n i s t r a t i v e

expect that the d i s ­

tribution of e c o n omic acti viti es will inv ariably f o l l o w
these boundaries.

It m ay even hap p e n that the ec onom ic

impact of a firm locat ed in one coun t y is m o s t l y felt in
the next county.

G iven the basis on w h i c h the a g g r e g a t i o n

has b e e n m a d e it is likely that most of the counties w i t h
important economi c in t e r d e p e n d e n c e have be en grouped.

This

em phas ize d ho w e v e r that BTAs are only a p p r o x i m a t i o n s of
functional

econo mic a r e as --a p r a c t i c a l lim i t a t i o n imp osed

by the use o f av ai lable statistics.
boundaries

Th e p r o b l e m of cou nty

is p r o b a b l y the m o s t im por tant o b j e c t i o n one

might have to the use of the in dividu al co u n t y as a unit
of observation,

al t hough in the statistical part of a case

analysis covering a lim it ed territory,

the d e l i n e a t i o n into

counties has the advan t a g e of p r o v i d i n g a larger n u m b e r of
obs er vations and th erefore a larg er numb e r of deg re es of
freedom.
Ano t h e r d i f f i c u l t y invo lve d in a ggrega ting counties
to form an ar ea is that one ma y so me times a ggregat e v e r y
diffe r e n t ent iti es and lose,

this way,

a part of the i n f o r ­

mat i o n he is inte r e s t e d in as well as part of the v a r i a b i l i t y
he attempts to explain.

In the first chapter, we obse rve d

that the central city and the su b urban ri ng of the largest
me t r o p o l i t a n areas are gr o w i n g at w i d e l y d ifferent rates.
This is the type of v a r i a b i l i t y we want to explain.

We are

76
int erested in seeing
ations ac co un ts
not help us.

if the l o c a t i o n of the larg est c o r p o r ­

for this fact.

Th e a g g r e g a t i o n here does

This is w h y we hav e d e f i n e d a s l i g h t l y d i f f e r ­

ent type of m u l t i - c o u n t y area that we call a m o d i f i e d ba sic
trading area.

It is m o d i f i e d in the sense that we have

made two areas out of each of the BTAs w h i c h involve the
largest m e t r o p o l i t a n areas.

On e m o d i f i e d B T A includes the

county of the central city of the me t r o p o l i s ,
includes the ring counties.

This,

the o the r

on the o t her hand,

br ing s

us back to the p r o b l e m of cou nty b o u n d a r i e s d i s c u s s e d in the
previous paragraph.

23

The p r e vious d i s c u s s i o n makes
tion of a t err i t o r y into areas

cl ear that the d e l i n e a ­

is a m u l t i d i m e n s i o n e d problem.

One is fa ced w i t h d e c i d i n g on trade off's b e t w e e n these
dimensions u s i n g v e r y imperfect k n o w l e d g e of the dimensi ons
as well as the trade off's.

This

is w h y in the st ati stical

part of the an alysis we have u s e d the th ree types of areas
discussed:

the BTAs,

m o d i f i e d BTAs and the counties.

We

hope to be able to add somet h i n g to this d i s c u s s i o n once
the resul ts of th e an alys is h a v e be en presented.

23 One o t h e r p o s s i b l e area d e l i n e a t i o n has b e e n d i s ­
carded:
the d e l i n e a t i o n into m e t r o p o l i t a n and n o n m e t r o ­
politan areas.
Th is w o u l d be con s i s t e n t w i t h on e of our
purposes in this r e s e a r c h as it w i l l bec o m e c l ear in the
next section.
H o w e v e r it w o u l d p r o v i d e a v e r y small
num ber of obse rvations.
M o r e o v e r the g r o u p i n g of all the
counties w h i c h are n o t part of an S M S A into one n o n m e t r o ­
po l i t a n area is felt to be too m u c h ag gregation.

77
U rban and Rural O r i e n t a t i o n of the Area s
A q u e s t i o n re l a t e d to our hyp o t h e s i s
Do the largest c o r p o r a t i o n s
areas, or,

altern ati vely ,

urban areas?

is the following:

tend to a v oid locating in rural

to w h a t ext ent do they p r e f e r

To ans w e r this q u e s t i o n we have to dete r m i n e

which of our areas are rural and w h i c h are urban.
census con siders
places

as u rban residents the person s

of m o r e than 2,500 persons.

criter ia but ad ded another criteria,

liv i n g in

B l u e s t o n e r e t a i n e d this
p o p u l a t i o n density,

classif y the counties of the Uni t e d States
o r i e n t a t i o n classes or groups

The

(Figure 3)

to

into six urban-

[Bluestone,

1970].

With this c l a s s i f i c a t i o n he found that 20.9 p e r c e n t of the
p op u l a t i o n in 1960 w e r e living in r u r a l - o r i e n t e d counti es
(groups 4,

5, and 6) as c o m p a r e d to the 26.5 p e r c e n t of

the p o p u l a t i o n the census considers as rural residents.
W e co uld u s e B l u e s t o n e ’s c o m b i n a t i o n of c r i t e r i a to
classify as r u r a l - o r i e n t e d the Ba sic T r a d i n g Ar eas w i t h an
urban p o p u l a t i o n of less than 50 pe r c e n t of total

an d a

popu l a t i o n density of less than 100 p ersons per sq uar e mile.
The o ther areas w o u l d be u r b a n-o riented.

Edwards,

Coltrane

and D a b e r k o v used this c l a s s i f i c a t i o n in their study and
found that

in 1960,

17.8 pe r c e n t of the p o p u l a t i o n was

living in r u r a l - o r i e n t e d areas
Daberkov,

[Edwards,

Coltrane,

and

1971].

One can c ert a i n l y q u e s t i o n the v a l i d i t y of u s i n g the
p o p u l a t i o n density of an ar ea as a c r i t e r i o n to eval uat e

78

©

85

0
50

©

©

© ©
i

ir\f\

Population per square
mile
Note:

Source:

500

Circled numbers indicate the urban-orientation of the county:
1.

Metropolitan

2.

Urban

3.

Semi-isolated urban

4.

Densely settled rural

5.

Sparsely settled rural with urban population

6.

Sparsely settled rural without urban population
<0% urban and 4-49.9 persons per square mile).
Bluestone, H . , "Focus for Area Development Analysis: Urban
Orientation of Counties," ERS, U.S. Department of Agriculture,
AER No. 183, May, 1970.

Figure 3.

Criteria for grouping counties by urban orientation.

79
its u r b a n or rural o r i e n t a t i o n since two areas w i t h a same
per cent age of u rban p o p u l a t i o n can be c l a s s i f i e d in d i f f e r e n t
groups sim p l y b e c a u s e one of t h e m inc lu des s everal square
miles of u n h a b i t e d forest.
po pul ation

One can w o n d e r also if the rural

(by Census definit ion )

(which inc lude s Detroit)

li vi ng in Wayn e county

is the same type of ru ral p o p u l a t i o n

as that living in A l c o n a county.

A n ans w er to this q u e s t i o n

would lead to a d i s c u s s i o n of what p e o p l e m e a n by r u r a l i t y
and urbanity.

We bel ie ve that

it is not n e c e s s a r y for our

purpo se to enter into this discus sio n.
who e x a m i n e d the question,

Dun c a n and Reiss,

found that count ies

or d e r e d by

M e t r o p o l i t a n status and size of the larges t u r b a n p l a c e c o n ­
tained rural p opulations w i t h sharpl y d i f f e r i n g c h a r a c t e r ­
istics

[Duncan and Reiss,

1956].

Ha tha way,

and te ste d the "genera l hy po t h e s i s
shapes and det e r m i n e s

T h eir

formulated

that m e t r o p o l i t a n dom inance

impo r t a n t social and e c o nomic c h a r a c t e r ­

istics of the rural p o p u l a t i o n "
1968] .

et al.

[Hathaway,

B e e g l e and Bryant,

i n v e s t i g a t i o n led them to a p r o p o s a l fo r census

c las s i f i c a t i o n and proc e d u r e s w h i c h includes

the m e t r o p o l i t a n

and n o n m e t r o p o l i t a n ca tegories n o w u s e d by the B u r e a u of the
Budget as a fu ndamental part of a r e s i d e n c e c l a s s i f i c a t i o n
scheme.

They state the following:
"The c r i t e r i a c u r r e n t l y us ed by the B u r e a u of
the Bu dg e t in the d e l i n e a t i o n of s t a n d a r d m e t r o ­
pol i t a n stat ist ica l areas ha ve no t been e v a l u ­
ated in this study.
However, the imp o r t a n c e of
the influe nce of m e t r o p o l i t a n areas on h i n t e r l a n d
pop u l a t i o n s has b e e n s t r e s s e d t h r oughou t the
monograph, and it is on the basis of the ev i dence

80
" p r esented that w e r e c o m m e n d a m e t r o p o l i t a n n o n m e t r o p o l i t a n d i s t i n c t i o n as an esse ntial
part of the r esidenc e c l a s s i f i c a t i o n schem e"
[Hathaway, B e e g l e and B r y a n t ,1968].
We will ret a i n here H a t h a w a y a n d B e e g l e ’s m e t r o p o l i t a n n o n m e t r o p o l i t a n d i s t i n c t i o n a n d th eref ore c o n s i d e r as urbano r i ented our BTAs con t a i n i n g one
and as r u r a l - o r i e n t e d
SMSA.

(or more than one)

SMSAs

our BTAs w h i c h do not include an

We cannot report h o w m a n y U.S.

r esidents w e r e living

in r u r a l - o r i e n t e d BTAs a ccording to this criterion.
do it for the two states

include d in our analysis.

We can
This

appears in Ta ble 10 w h i c h also in dicates h o w m a n y p e o p l e in
these states w o u l d be c o n s i d e r e d as

living in a rural B T A if

the o t h e r de f i n i t i o n s d iscussed above w e r e adopted.
Table 10.

P e r c e n t a g e of Rural P o p u l a t i o n and P e r c e n t a g e
of the Pop u l a t i o n Livi ng in Rural BT A wi th
A l t e r n a t i v e Cri teria Used to Def i n e the Rural
Or ient ati on, M i c h i g a n and Cal ifornia, 1970.

P ercent Rural
(Census)

Percent of P o p u l a t i o n
in Rural BT A
Blues t o n e
C r i teria

Cali fornia
Both States
Source:

26.2

7.5

9.1

5.4

I-.
•
00

Michigan

Hathaway
C r i teria

14.6

6.1

11. 0

16.6

O b t a i n e d from U.S. Bur e a u of the Census, U.S. Census
of Population:
1970, Num b e r of I n h a b i t a n t s , Final
Report, PC(1)-A1, U.S. Summary, Was hin gto n, D.C.,
1971, and A p p e n d i x T a b l e 1.

81
The M e a s u r e m e n t of A r e a Growth D i f f e r e n t i a l s
A r e a gro w t h d i f f e rentia ls can be m e a s u r e d sim p l y by
calc ula tin g a rate of gro w t h for each area an d compa r i n g
them.

The differences observed,

at least two disti nc t effects.

however,

are the res ult s of

One eff ect is rel a t e d to

the indu str ial c o m p o s i t i o n of em ployment

in the area;

the

other relates to the co m p e t i t i v e n e s s of a lo catio n vis-a - v i s
other locations.
factors

In a study a t t e m p t i n g to iden tif y some

that can be at w o r k in a local economy to m a k e it

grow faster than others,

the gro wth d i f f e r e n t i a l s r e s u l t i n g

from the com p e t i t i v e effect appea rs as the most

important

to explain.

effect.

It seems desir a b l e to isolate this

shift analysis
and Perloff,

technique,

et al.

pre cisely that.

w hich wa s u s e d by Fuchs,

in co m p a r a t i v e g r o w t h studies,

A s hby
does

It identifies a " c o m p a r a t i v e gain or loss

adjus ted for industrial str u c t u r e "

[Fuch,

"compe tit ive effect"

or a "local

[Perloff,

The

[Ashby,

1964]

1962]

or a
factor effect"

1963].

The f ormula used to compu te this effe ct is the following:

Mx -

• - p si£ r

+ p.ifcr

• V

5

Where:
M

X

53 The co m p a r a t i v e gain or loss in e c o nomic a c t i v i ­
ties (employment or personal i n c o m e ) , a d j us ted
for industrial structure, in area s b e t w e e n the
initial and the final year.
- = Ec ono m i c act ivity in initial y e a r of indus try i
in area s.

82
X * = Eco no mic a c t i v i t y in initial y e a r of all
industries in area s.
X*i - E c o n o m i c a c t i v i t y in initial y e a r of indust ry
i in all the areas.
X*

= Economic a c t ivity in initial y e a r of all
tries in all the areas.

Y

., Y s * , Y-i repr esent the e c o nomic act i v i t i e s
terminal year.

This

formula

and Ashby.

indus­
in the

is a com b i n a t i o n of t hose u s e d by Fuchs

Fuch us ed the formula as f o r m u l a t e d e xce p t that

he in cluded a de n o m i n a t o r

in order to express

tive ga in in percentage.

W e w a n t to a v o i d this p r o c e d u r e

for a rea s o n gi ven in the next section.
following

the c o m p a r a ­

A s h b y u s e d the

formula:

Ms ■ V

- ?xs i £ r

or the first te rm of the ea r l i e r expr e s s i o n a f ter d r o p p i n g
the % be fo r e the parenthesis.
his co m p e t i t i v e effect,

In o t her words, A s h b y compu tes

a d j u s t e d for indu s t r i a l

structure,

the adj us tmen t b eing e n t irely based on the s t r u c t u r e of the
initial year.

Fuchs,

by u sing the se cond te rm of the for mul a

"a m i r r o r image of the first," takes ac c o u n t of the s t r u c ­
ture of the final y e a r in an a ttempt to a p p r o x i m a t e a m o r e
pre cise m e t h o d that cal cu lat es

the c o m p a r a t i v e gain for each

year of the p e r i o d and then sums them.
A s h b y does not m a k e the c o r r e c t i o n m a d e by Fuchs
prob abl y b e c a u s e he has d i s c e r n e d a r e l a t i v e rise in the
importance of the compe titive

effect as c o m p a r e d to the

83
industrial mix.

Burrows,

that the adj u s t m e n t
that

[Burrows,

Fuchs'

d i s c u s s i n g this

technique suggests

for indu str ial s tr ucture is n ot impor-

1971,

p.

11-15].

He bases his j u d g m e n t on

findings of a high c o r r e l a t i o n b e t w e e n the c o m p a r a t i v e

gain a d j usted and u n a d j u s t e d and no c o r r e l a t i o n b e t w e e n
com par ative gain or loss, unadju ste d,
ture.

an d indu stri al s t r u c ­

In o ther terms there w o u l d be li ttl e a s s o c i a t i o n

between a s t a t e ’s u n a d j u s t e d c o m p a r a t i v e gro w t h an d its
proportion o f h i g h gro w t h industries.
note, however,
(the states)

that Fuchs

findings

It is importa nt to

are for v e r y large areas

and it is likely that the l a r g e r the areas,

the simi lar the industrial structure.

And,

of course,

if

the areas c o n s i d e r e d have the same industrial structure,
adjustment

the

for industrial s t r u c t u r e is mea nin gle ss.

It sho u l d be n oted finall y that for the p u r p o s e of
Burrows'

analysis,

w h i c h used 1950 s o c i o - e c o n o m i c v ariables

to expla in employ men t

in 1960 in each indu str y the shift

technique is unapplicable.

Fuchs,

o n the other hand,

used this co m p a r a t i v e gain adj us ted as a d e p e n d e n t v a r i a b l e
in a f u n ction d e s i g n e d to exp l a i n gro wth diff e r e n t i a l s
between states.
The ad justm ent for indu str ial struc t u r e in ou r analysis
is ma de u s ing the U.S.

B ure a u of the B u d g e t 1 digit

indust ry

level of c l a s s i f i c a t i o n rather th a n a fi ner d e t a i l e d c l a s s ­
ification

[U.S.

Bur e a u of the Budget,

1967].

This is to

keep the co m p u t a t i o n at a m a n a g e a b l e level and be c a u s e the

84
most import ant

adj ustment to be ma de is p r o b a b l y an a d j u s t ­

ment a c c o u n t i n g for the r e l ative s p e c i a l i z a t i o n of some of
our areas
mining.

in the declini ng ind ust rie s of a g r i c u l t u r e and
The 1 digit

indust ry level of c l a s s i f i c a t i o n is

enough to take account of that.

The Eco n o m e t r i c Test of S i g n i f i c a n c e
of the Hyp othesis In vesti gated
T h e h y pothe sis
recall,

i n v estigated in this research,

asse rts that area gro w t h d i f f erentials

yo u

are p r e ­

do min antly e xpla ined by the cho ice o f locati ons of the
largest m a n u f a c t u r i n g corporations.
requires

T e s t i n g this h y p othesis

that we m e a s u r e the extent to w h i c h area growth

differentials

are ex pla ined by a v a r i a b l e r e f l e c t i n g this

choice and to what extent they are expl a i n e d by other
variables.

It involves

the f o r m u l a t i o n and e s t i m a t i o n of a

f u n ction includi ng these variables.

The pro c e d u r e s

fol lo wed

to per f o r m this test are d e s c r i b e d below.

The General

F u n ction to be Esti m a t e d

We have c h o s e n the fo llo wi ng e q u ation for the d e t e r ­
minants of the comparative gain or loss in e m p loyment in
area s b etween 1960 and 1970:
X ls
Where the
X1

= f (X 2 s ........Xns^
var iables

are defin ed as:

* the comparative gain or loss in empl o y m e n t in area
s bet w e e n 1960 and 1970 (C omparative Gain)

85

^2s “ To tal

employ men t

in area s in 1960

(Employment-60)

X,

** La r g e s t firms' e m p loy ment ch ange in area s
be t w e e n 1960 and 1970 (Large Firms)

X.

= Per ca pita local gov e r n m e n t e xpend i t u r e s
areas s, 1962 and 1967 (Government).

X,

= Per c e n t of p ersons 25 years and ov er w i t h high
school or m ore e ducati on in are a s in 1960
(Education).

X fi

= Lo ng term ave rage t e m p e r a t u r e in area s ( T e m p e r ­
ature) .

X?

= A v e r a g e m a n u f a c t u r i n g w a g e rate in area s in
1963 (Wage rate).

Xg

= A v e r a g e p ri ce of a g r i c u l t u r a l land
in a r e a s in
1964 ( L a n d ) .
(A m e a s u r e of the a v a i l a b i l i t y of
cheap l a n d ) .

Xg

= D i s t a n c e o f area s to n e a r e s t S M S A w i t h 250,000
p ersons or mo re ( D i s t a n c e ) .

in

X-^g = D ummy variable, 0 for B T A or m o d i f i e d BT A
s
lo c a t e d in
M i c h i g a n an d 1if lo c a t e d in
California.
e
This

= Error term as s u m e d to fol l o w usual as sum pti ons,
see Kme n t a [Kmenta, 1971, p. 202].
eq uation states that the co m p a r a t i v e gain in

employment in an area is a f u n c t i o n of the size of the area,
the change in the acti vit ies

of the leaders

(largest

firms)

and a set of variab les r e f l e c t i n g in some wa y the a t t r a c t i v e ­
ness or d e s i r a b i l i t y of an area for industry.
The size of scale v a r i a b l e

(X 2 ) was en t e r e d b eca use

both Fuchs a n d Bur rows

sugge s t e d that it is imp ortant to

include.

scale v a r i a b l e to test a c a t c h i n g up

Fuchs u s e d a

hypothesis w h i c h assert s that th ose areas
wi th a small

(states

in his case)

em ploym ent base at the b e g i n n i n g of the p e r i o d

86
are e x p e c t e d to grow faster

[ F u c h s , 1962].

Burrows'

scale

varia ble was as s u m e d to accou nt for the p r e s e n c e of a g g l o ­
merat ion economi es w hich are a t t r a c t i v e
The largest

firms'

for firms.

e m p l o y m e n t ch ange

variable we chose to acco unt

(X^)

is the

for what is desi g n a t e d as the

choice of loc ation of the largest m a n u f a c t u r i n g cor p orations
in the formulation of our b asic hypothesis.

Of course,

the

variable me asures more than just n e w choices of location.
But we b e l i e v e that the e x pansion of a pl ant

a c c o m p a n i e d by

an increase in emp loy men t also ref lec ts a ch oice of location;
it is the c o n f i r m a t i o n of a l o c a t i o n decision.
has an important
Moreover,

impact on an area.

It cert a i n l y

We cannot leave it out.

the de cisi on of a firm to close an establishment

in an area,

ma y be the result of a choi c e of l o c a t i o n and it

may have a strong impact on the area.

The v a r i a b l e def ine d

takes acc oun t of all these changes.
The me a s u r e m e n t of this v a r i a b l e
blems.

i nvo lv ed a few p r o ­

First we had to deter m i n e w h i c h c o r p o r a t i o n s we w e r e

to include in the analysis.

Fort une M a g a z i n e p ub lishes

every year a list of the 500 largest
[Fortune,

1971].

We de c i d e d to inc lud e

200 of these w h i c h were the largest
the remain ing

ind ust ria l cor porations
in our analysis

in 1970 plus

300 whic h had their head office s

selected for the analysis.

the

those among

in the states

It is obvious that some of these

are pri marily m i n i n g compa nie s an d m a n y others
than m a n u f a c t u r i n g activities,

have othe r

but at this point that p roblem

was set aside for mor e importa nt difficulties.

87
Mo st

of the c o rporations

included p u r c h a s e d other firms

during the p e r i o d 1960 to 1970.

It is obvious

that if ITT

purc hased 50 o t her firms du rin g the p e r i o d and if we count
the em ploym ent of
part of

ITT in 1970 and its employment

the diff e r e n c e

in 1960,

a

in its n u m b e r of emplo yee s will be

the result of its a c q uisiti ons rath er than the res ult of new
investment

leading it to hire ne w empl oyees

in an area.

Wha t

we re all y want to me a s u r e is the num b e r of n ew em plo yee s
hired by the lar ges t c o r p o r a t i o n s during the period.
ding on the type of links exis tin g be t w e e n

firms,

Depen­

the c o n ­

tro lled firm ma y eith er resume its ope r ations u n der the same
name or op erate under the name of the co n t r o l l i n g firm.
Therefore,

to av oid c o u n t i n g the employment of a fir m in

1970 and o m i tti ng it in 1960, w e h ad to include

in our list

for 1960 all the firms w h i c h h a d be en the ob jec t of mer gers
or other

forms of ac q u i s i t i o n be t w e e n 1960 and 1970.

tunately the Moody' s

Industrial Ma nua l

[Moody's,

1971]

For­
pro­

vides a hi s t o r y of the ac quisition s m a d e by a v e r y large
number of firms.

Using these h i s t o r i c a l notes we c o u l d then

complete our list of compan y names.
Ap pen dix Ta ble

This

list is g i ven in

2.

The next task was to count the emp l o y m e n t of each of
them in 1960 and 1970 an d me a s u r e

the difference.

The

problems r e lated to th ese em ployment figures are d iscussed
in the secti on on the data sources.
The oth er variables we re includ ed to accoun t for

88
char act eristics r e f lecting the relative a t t r a c t i v e n e s s of
areas for firms or the efforts m a d e to inc rease this a t t r a c ­
tiveness.

Y o u recall that a s e c o n d a r y h y p o t h e s i s of this

research is that pub lic p r o g r a m s f o c u s i n g on these c h a r a c t e r ­
istics are w e a k means
expect that

to en h a n c e ru ral growth.

these vari ables will

explain m u c h of the v a r i ­

ability of the d epende nt va riable,
we must inclu de them.
to be l i e v e that
entials

but to test that m a t t e r

Some of the r a t i o n a l e le ading pe ople

these variables m a y ex p l a i n gro w t h d i f f e r ­

is n o w spell ed out briefly.

The hig h e r the pe r capi t a local
tures,

We do not

gove r n m e n t e x p e n d i ­

the be tte r sh ou ld be the local servic es to firms and

families

in the area.

local off ici als

It m a y also r efle ct the effort s of

to imp rov e the a t t r a c t i v e n e s s of the area.

The p e r c e n t a g e of the adult p o p u l a t i o n w i t h a high school
level or m o r e of e d u c a t i o n m a y refl ect the a v a i l a b i l i t y of
skilled workers.

Fuchs used a v a r i a b l e a c c o u n t i n g for the

temperature.

His me a s u r e was

a deviation

ing that this

is an ideal t e m perature,

as we ll as air c o n d i t i o n i n g costs.

from 6S°F,

assum­

reduc i n g h eating

We b e l i e v e that the

average annual te m p e r a t u r e is a good m e a s u r e

since only one

of our B T A areas reaches his o ptim al temp era ture .

Variable

Xy is to acco unt for the fact that m a n u f a c t u r e r s w o u l d tend
to av oid high wa ge rates.
price of a g r icultural

It is as s u m e d that the lower the

land is,

the easier

it will be to find

an inexpensive site on w h i c h to b u ild a plant.

Finally,

the

89
further away an ar ea is from h i g h l y d e v e l o p e d centers

(SMSAs)

the least att r a c t i v e it s hou l d be for industries.
We also incl uded a d u mmy v a r i a b l e to take a ccount of
u nid en t i f i e d effects

that migh t p o s s i b l y e x p l a i n hi gher

gains in the ar eas of on e of the two states.

The Diffe r e n t Fu nctional
The f u n ction above was
functional forms.

Forms

e s t i m a t e d u s i n g two diff erent

The first

is the si mpl e li ne ar form as

used by Fuchs, w i t h w h i c h he got q uite good r esults both
in terms of statistical s i g n i f i c a n c e and si gn of the co7
efficients of the e x p l a natory vari abl es, and the R value.
In this form,

the func tio n becomes:

X ls = a l = b 2X 2s + '•

*

*”

+bn X ns

It is app r o p r i a t e at this point
depende nt variable,

+ es

to ex p l a i n w h y the

com p a r a t i v e gain or loss

adjusted for industrial
centa ge as Fuchs did.

structure,
Burrows

in employment,

is not e x p r e s s e d in p e r ­

[p. IS]

rightly poi n t s out

that if the co m p a r a t i v e gain is e x p r e s s e d in p e r c e n t a g e it
distorts

the m odel w r i t t e n above.

percentage,

If

is e x p r e s s e d in

i g n oring now the fact that it is an averag e

over the two base years,

it can be defined,

u sing the same

n o t a t i o n as in Chap ter IV, the infere nce s of the results,
as follows:

X

Y«= —

- r X .Xfi
i siX'i

V

90
But Xj b e i n g de f i n e d this w a y the e q u a t i o n above becomes:

Ys ■ al V

+ b2X2 s V

4 ...... b„Xn s V

+ ?Xsi3Tr 4 es

a f u n ction diffi c u l t to ju s t i f y theo ret ica lly ,

in Burrows'

opinion.
If we do not express
then,

the co m p a r a t i v e gain in percent age ,

the function can be written:

Y • -X— r " a, + b ~ X , c + b X c + e c
s
J SIX-l
1
2 Zs
n ns
s
whic h is a c k n o w l e d g e d by B urrows
model."

He n e v e r t h e l e s s makes

model.

He ar gues

that this

to be a "more d e f e n s i b l e

anoth er c r i t i c i s m of this

fo r m u l a t i o n con strains the c o e f ­

ficient of the c o n s t r u c t e d variable:

EX
^ s l X sl
to be 1.

This c o n s t r u c t e d v a r i a b l e

the e xpec t e d emplo yme nt
structure.

Since,

is n o t h i n g less than

in an area gi ven its ind ustrial

as al r e a d y noted,

his i n t e r p r e t a t i o n of F u c h s ’ results,

he thinks,

b a s e d on

that the indus tri al

structure of an ar e a does not infl uence

its growth,

he can

hardly admit that this co e f f i c i e n t sho u l d be c o n s t rai ned
to 1.

He bel ieves

it sho u l d be zero,

it shou ld be the obj ect of research,
research.

but he suggests

not an a s s u m p t i o n of

We have ta ken h im at his w o r d and,

of the regression,

that

in on e run

e stimated the fo llo win g function:

Y s * = a i + b 2X 2s +,.

. -,bn Xns + b n+1

+ es ,

91
in which:
Y

*

= Total emplo yme nt
ment-70)

s
Y *i
.\r~~r
*

2)X
i

=

X

in area s in 1970

(Employ-

- = E x p e c t e d e m ployment in area s in
1970 (Eff ected employment)

The second functional

form u n d e r w h i c h the f u n ct ion

is esti m a t e d is p r o p o s e d by Burrows.

He states that the

relation shi p s p e c i f i e d in an e q u ation such as the one
spec ified here are
", . .almost certa i n l y not linear.
To assert
line arity w o u l d be to assert, for example,
that the a b s olute effect on emp l o y m e n t of a
o n e -year incr ease in a verage years of s c h o o l ­
ing is c on st ant for all counties, i n d e p endent
of all other variables, i ncluding such 'size*
va riables as lagg e d em ployment or total labor
force" [Burrows, et al., 1971, p. 24].
As an al t e r n a t i v e to linearity, he p r o poses the fol low ing
exponential

form:

X ls = X 2s 2 exP ( a i + b 3X 3s
Bur rows
in this

suggests

* * ,bn Xn s ^ u s

that all the right hand variables

funct ion can enter in a m u l t i p l i c a t i v e form.

was de c i d e d for the p urpose of this study,
Burrows model an d enter the v ariables

It

to m o d i f y the

ex pr e s s i n g a rate in

the expon ent ial part and the v ariables w h i c h are a b s o l u t e
n A

values in a m u l t i p l i c a t i v e form:

^We

thank Dr.

L. V. M a n d e r s c h e i d for the suggestion.

92

X ls " exP ( a 1 + t>4X 4s + b 5X 5s + b ?X 7s + b gX g s + b 10 X 1 0 s )
xb 2 xb3 X^^ Xb9
*2s
3s
6s
9s
Written in logarithm,

lnXls

• u
us

the f u n c t i o n then becomes:

a l + b 4 X 4s + b 5X Ss + b 7X 7s + b 8 X 8s + b 1 0 X 10s +
b 2l n X 2s + b 3l n X 3s + b 6 l n X 6s + b 9 l n X 9s + l n u s

in w h i c h Inu

= e

w i t h its prope rti es.

Burrows di d not get ve ry good resul ts w i t h this
of equation;

he esti mated se ver al equat ion s

of 22 industries),
were s ignif icant

type

(one for each

few of the v e r y ma ny varia b l e s he used

in a m a j o r i t y of the 2 2 equati ons

and the

sign of the signif icant v ariable s was not the same from
one indus try to another.
Nevert hel ess, w e r e t a i n e d this
the po or quality of his results

is not n e c e s s a r i l y due to a

mi s s p e c i f i c a t i o n of the functi ona l
points out,

expo nential form b e c a u s e

form.

One reason,

as he

is "we are c o n s t r a i n e d to examine eco nom ic r e l a ­

tionships w i t h data w h i c h p r o b a b l y are for areas differ ent
from those relevan t to the fu nct ions being c o n s i dered"
(Burrows,
data.

et al.,

1971, p.

The data he used was county

He m e n t i o n s that this does not take account of the

fact that two counties
areas

26].

can be f u n c t i o n a l l y related.

The

(BTAs) we use sh ould a ccount for fun ctio nal i n t e r ­

relationships .

93

The Es t i m a t i o n Procedu res
The functions

f o r mulated wi ll be esti m a t e d by the

meth od of o r d inar y least squares
tions.

One problem,

Burrows

(OLS) w i t h all its a s s u m p ­

suggests, w i t h a model of this

type is that all the v a r i a b l e s m a y be a s i multaneous
action of forces.

He notes,

however,

inter­

that it w o u l d be

excee din gly di fficult to find a s a t i s f a c t o r y s o l u t i o n to
this problem.

25

We will re port a m a t r i x of c o r r e l a t i o n

showing how these var iab les mo ve together.

The w a y in w h i c h

the d ependent v a r i a b l e is f o r m u l a t e d in our model,
tive ga in in em ployment be t w e e n 1960 and 1970,

compara­

leads us to

believe that it cannot be h y p o t h e s i z e d to be an e x p l a nator y
v ariab le of any of our p r e d e t e r m i n e d va riables.

W e do not

see how the gain in emp loyment of an area r e l a t i v e to the
average area du rin g a de cad e can be of any inf luence on
the size of that area or the level of e d u c a t i o n or anoth er
characte r i s t i c of the p o p u l a t i o n at the b e g i n n i n g of that
decade.

Th erefore,

w e b e l i e v e all our ex p l a n a t o r y var iab les

are really p r e d e t e r m i n e d and the i d e n t i f i c a t i o n p roble m
is avoided.

25

Factor anal ysi s is b e l i e v e d to take care, at least
partly, of this p r o b l e m by id e n t i f y i n g am ong a group of
interrel ated variables inde pen den t factors to whic h a
"score" is given which enters the regression.
It m a y not
help ho w e v e r the int e r p r e t a t i o n of the results nor the
polic y imp lica tio ns since it tests the s i g n i f i c a n c e of these
compo sit e factors rather than the origi nal varia b l e s unde r
study.
For this reason and bec a u s e it is more c o m p l i c a t e d
this m e t h o d has been discarded.

94
Another

p r o b l e m ma y ar ise fr om h e t e r o s k e l a s t i c i t y of

the di s t u r b a n c e terms.

Burrows

suggest s that a s y stema tic

relationship m a y exist b e t w e e n the size of the v a r i a n c e and
the size of the area.

He b e l ieves

that his l ogarithmic e s t i ­

mating e q u a t i o n is rough ly c o r r e c t e d for that since,
form,

the s m a l l e r o b servat ions are g iven a h e a v i e r we igh t or,

"in re lati ve terms,

the u p per ranges of the di sturbances

scaled down and the lower ranges are scaled up"
al.,

in this

1971,

p.

47].

It is di ffi c u l t

[Burrows,

to assert a pr iori

the s y s tematic r e la tionship Burro ws postulates does
This p o s s i b i l i t y is, however,

are
et

that

exist.

a further re as on to use both

no nlogarithmi c and logarithmic estimat ing equations.

The States S e l ecte d for the Case Analys is
To e s t imate the above functions,
better to hav e obs er vations
Areas of the country.
purpose of a thesis,

it w o uld c e r t a i n l y be

for all the 489 Basic T rading

It was

felt, however,

that,

for the

it could be as relev a n t and c ertainly

more p r o p o r t i o n a t e to the fi nancial means of its aut hor to
pe rform a cas e analysis

applyi ng the m e t h o d o l o g y to o b s e r ­

vations g a t h e r e d in a few states only.

M i c h i g a n was

sele cte d

because it is the state in w hich the r e s e a r c h has been p u r ­
sued.

C a l i f o r n i a was selec ted b e c a u s e this

is the state

with the larg est c omparative gain in em ployment
and Pe rlo ff' s studies.

in Fuchs

It is cert a i n l y an interesting case

to in vestigate the factors acc o u n t i n g for co m p a r a t i v e gains.

95
The two states t o g ether have 45 B a sic Tradi ng Areas.
With 10 paramete rs
freedom.

to estimate,

that leaves

35 deg ree s of

The fun ctions we re also e s t i m a t e d us ing the o b s e r ­

vations for the m o d i f i e d B a sic T r a d i n g Areas of each state
separately.

We have only 24 such areas

25 in California.

in M i c h i g a n and

In this case the n u m b e r of de gr ee s of

free dom is s u b s t a n t i a l l y reduced.

T hese results

are not

dis cussed but re ported in the appendix.
The Data Sources
The data u s e d in this analysi s are s econd ary da t a take n
direc tly or de r i v e d from p u b l i c a t i o n s of the Census Bureau
of the Uni t e d States

for all the va ria bles

except the v a r i ­

ables m e a s u r i n g the chan ge in em ployme nt of the largest
corporations,

the d i s t a n c e to the ne a r e s t m e t r o p o l i t a n area

and the avera ge temperature.

A r e f e r e n c e to the public a t i o n s

from w h i c h the da ta w e r e o b t a i n e d is give n at the b o t t o m of
Ap pe ndi x Table 1 in w h i c h we report these data for each
county included in the analysis.

W e m a k e here only a few

comments on the re l i a b i l i t y of these data and some other
problems.
The em ployment data us ed to m e a s u r e the de pen d ent
and the scale
sources.

(X 2 ) var iables

come from two a l t e r nati ve

W h e n we use the BT A as units

of o b s e r v a t i o n the

employment data are from the Census of pop ulation.
data are resid ent ial

(Xj)

These

em ployment da ta w hile our da ta on the

change of em ployment of the largest c o r p o r a t i o n s

are

96
establishment emp l o y m e n t data.

We believe that this does

not introduce too m u c h d i s t o r t i o n in our model.
BTA are de f i n e d as fun cti ona l

areas,

Since the

likely to a p p r o x i m a t e

labor market areas, most peo p l e are e x p ected to w o r k in the
area w h e r e they live.
persons,

em ployment data inc lu de all

16 ye ars old and ov er in 1970 and 14 years old

and over in 1960,
obvious,

These

at w o r k in the w e e k of April

from the formul a used to co mpu te it,

1.

It is

that the c o m ­

parati ve gain in emplo yme nt b e t w e e n 1960 and 1970 is u n d e r ­
stated by the fact that the perso ns of 14 and 15 ye ars old
*7 ft

at w o r k are ex clud ed in 1970.
un ders tatement however,

It cannot be an important

since these pers ons a ccount for

only about 1 pe r c e n t of the total

employment.

data on employment are based on a 20 percent
data therefore,

Final ly these
sample.

The

are subject to a sa mpling v a r i a b i l i t y w h i c h

is relatively larger the sm a l l e r the area for w h i c h a nu mb er
of employees

is estimated.

This

is shown in Tables

11 and

12 .
In the set of r e g r e s s i o n runs using the m o d i f i e d BTAs
or the counties

as units of obser vati ons ,

are from County Busi nes s Patterns.
employment data.

They are,

the empl o y m e n t data

These are es tablishment

of course, m o r e a p p r o p r i a t e data

to use when the unit of o b s e r v a t i o n cannot be c o n s i d e r e d as
a functional area since the employment

is a c c o u n t e d w here the

7 ft
The n u m b e r of per so ns 14 years old and over at
work is given for 19 70 but not by indus try at the co unt y
level.

Table 11.

Approximate Standard Error of Estimated Number of Employed Based on 20 Percent
Sample.

Estimated
Number of
Employed 10,000

Number of Persons in Area
25,000

100,000

250,000

1 ,00 0,0 00

3,000,000

5,000,000

2 0 ,000,000

50......
100 .....
250.....
500.....
1 , 0 0 0 ___

■ 15
20
30
45
60

15
20
30
45
60

15
20
30
45
65

15
20
30
45
65

15
20
30
45
65

15
20
30
45
65

15
20
30
45
65

15
20
30
45
65

2,500___
5,000___
1 0 ,00 0 ...
15,000...
25,000...

90
100

95
130
150
150

100
140
190
230
270

100
140
200
240
300

100
140
200
240
310

100
140
200
240
310

100
140
200
240
320

100
140
200
240
320

50,000...
75,000...
100 ,000 ..

—

320
270

400
450
490

440
520
600

440
540
620

440
540
630

450
540
630

Source:

—
—

---

—

.

_ - _

—

-----

—

-----

-----

U.S. Bureau of the Census, Census of Population:
1970, General Social and
Economic Characteristics, Final Report, P C (1)-Cl, Appendix C.

work is performed.
employed,

27

Th ese da ta do not c o ver the self-

farm worke rs,

d o m e s t i c se rvice w or kers no r g o v e r n ­

ment employ ees but cover all o the r perso ns at w o r k in the
we ek of M a r c h 12.

The da ta are der i v e d from T r e a s u r y Form

941 w h i c h must be filed

by all em pl oyers

that their n u m b e r of em pl oyee s
ately.

In m a n u f a c t u r i n g

in each coun ty appe a r s e p a r ­

ind ust rie s

the r e p o r t i n g units

"conce ptu ally the same as e s t a b l i s h m e n t s , "
number of repo r t i n g units
number of est a b l i s h m e n t s
1-3].

in such a way

so that

are

the

in a cou n t y is eq uivalent to the
[U.S.

Bure a u o f Census,

1971,

p.

Coun ty Business Patterns w i t h h e l d the e m p loyment

data for some

industries

in some count ies

sure of the o p e r a t i o n of a gi ven employer.

to a v oid d i s c l o ­
The d a t a w i t h ­

held are i n c luded in the totals but this prevents us

from

making the ad justment for ind ust ria l struc t u r e w h e n c o m p u t ­
ing the c omparative gain.
not p r o d u c e d in 1960.

Fin al ly this p u b l i c a t i o n was

Therefore,

the co m p a r a t i v e gain we

calc ula ted w i t h this sou rce is a gain r e a lized in 11 years
(1959-1970)

ra the r than 10 years.

Given all the di f f e r e n c e s n oted b e t w e e n the two
sources of i n f o r mation and the metho ds u s e d to compute the
com parative gains or losses in employment,
our analysis,

variable

there are c e r t a i n l y di f f e r e n c e s

sets of regres sions performed.

in

in the two

In Table 13, we illus tra te

27
Burr ows used Census da ta w i t h n o n f u n c t i o n a l

areas.

99
Table 12.

Approximate Standard Error of Estimated Percentage Employed,
Based on a 20 Percent Sample.

Estimated
Percentage

Base of Percentage
500

1,000

2,500

10,000

2 or 98

1.3

0.9

0.6

0.3

5 or 95

2.0

1.4

0.9

10 or 90

2.7

1.9

25 or 75

3.9

50

4.5

Source:

100,000

250,000

0.2

0 .1

0.1

0.4

0.3

0.1

0.1

1.2

0.6

0.4

0.2

0.1

2.7

1.7

0.9

0.5

0.3

0.2

3.2

2.0

1.0

0.6

0.3

0.2

U.S. Bureau of the Census, Census of Population: 1970, General
Social and Economic Characteristics, Final Report PCCl)-Cl,
Appendix C.

Table 13.

Total Employment and Average Annual Rate of Change According
to Alternative Source of Information, Michigan, California
and Selected Areas and Counties, 1959, 1960 and 1970.

Census of Population
1970

1960

Thousand
Michigan
California
Both States
Detroit Area
Los Angeles Area
San FranciscoOakland Area
Wayne County
Los Angeles
County
San Francisco
County
Alamenda
County
Source:

25,000

Average
Annual
Change
Percent

County Business Patterns
1970

1959

Thousand

Average
Annual
Change
Percent

3,253
7,485
10,738

2,727
5,761
8,488

1.93
3.0
2.65

2,497
5,517
8,016

1,866
3,713
5,579

3.07
4.42
3.97

1,732
3,371

1,440
2,616

2.02
2.89

1,409
2,831

1.072
1,942

2.86
4.16

1,762

1,331

3.24

1,327

854

5.03

998

954

0.50

922

815

1.19

2,827

2,374

1.91

2,492

1,829

3.30

318

331

-0.03

402

322

2.26

417

338

2.33

295

210

3.68

Appendix Table 1.

100
the diffe rences be t w e e n the two sourc es by r e p o r t i n g the
empl oyment figures and an ave rag e annual
during the pe r i o d considered,

rate o f growth,

for the two states and s e l e c ­

ted areas or counties.
The
ments

employment

figures

for the m a n u f a c t u r i n g

op era ted u n der each firm's name

establis-

in each co unty includ ed

in ou r areas were taken from a d i r e c t o r y of Key M a n u f a c t u r i n g
plants p u b l i s h e d b y Sales M a n a g e m e n t
[Markets Statistics,

1970;

for b o t h 1960 and 1970

Sales Mana gem ent,

directo ry gives an emplo yme nt

1960].^®

The

figure r ounded to the n earest

hundre d for all m a n u f a c t u r i n g plants with 500 or mo re

employees

in 1960 and for all m a n u f a c t u r i n g plan ts with 100 or mor e
employees

in 1970.

We have t aken for both years the e m p l o y ­

ment figure for only the m a n u f a c t u r i n g plants w i t h 500 or
more employees.

It is obvious

that the m e a s u r e m e n t of the

empl oym ent ch ang e w o u l d be mo re precis e
listing of all the es tab lis hments
both years.

Suppose,

if we ha d a comp let e

inc lu d i n g the small est

as an example,

that the emp l o y m e n t of

a given p lant increases

from 400 in I 9 6 0 - to 500 in 1970:

change

but we count

is 100 employees

28

We believe,

that the error inv olved is r e l a t i v e l y small

most of the emp loy men t of these firms

the

500 empl oyees since that

plant is not listed in the 1960 directory.
however,

in

since

is in plants of a

In 1970, the name of the publi s h e r had changed,
the o r g a n i z a t i o n was the same.

but

101
larger size than b e t w e e n 100 and 500 employees
in 1970).

Mor eover,

(91 p er cent

there is an error in volved only in the

cases o f plants w h ose e m plo yment we nt

from b e l o w 500 to

over 500 duri ng the decade.
It is likely that the m e a s u r e m e n t
the p r e v i o u s parag r a p h

error d i s c u s s e d in

is r e l a t i v e l y m o r e im por t ant in the

small areas w h ere the firms ha ve few empl oyees
large establishments.

and few

It is impo rta nt to note that this

w o uld m u c h more se verely limit the p r e c i s i o n of our da ta if
we w e r e ex pres sing

in our m o d e l

in p e r c e n t a g e

terms.

W here there is a very small base to c a l c u l a t e a p e r c e n t a g e
change,

the omission of a few small

ma ke a hu g e difference.

If,

for example,

indicates that the em ployment
from 0 in 1960 to 500 in 1970,
infinite.

If,

in fact,

of the largest c o r p o r a t i o n s went
the p e r c e n t a g e c h a n g e is
the p e r c e n ­

In an area like Los Angeles,

indicates went

from 304,400 to 362,300,

error of even a few th ousand em plo ye es
in some establishm ent s

coul d

our m e a s u r e m e n t

it w e n t from 400 to 500,

tage ch ang e is 25 percent.
w hic h our me a s u r e

establis h m e n t s

an

(due to the fact that

the empl o y m e n t was b elow 500 in 1960

and over 500 in 19 70 and th ere

is no w a y we ma y take account

of the

es tabl ishment)

1960 em ployment of this

much diff e r e n c e on the p e r c e n t a g e
of v a r i a b i l i t y
error

(between areas)

change.

G iven the range

of this variable,

involved in either large or small areas

important.

It is p r o b a b l y however,

to f ormulate our model

does not make

the a b s olute

is not that

an imp ortant rea s o n not

in p e r c e n t a g e terms.

102
There are ob vio u s l y ot her p o s s i b l e sources

of errors

like in co rrect repor t i n g of emp l o y m e n t figures or even o m i s ­
sion of some es tab lis hments
that in so me cases,

in some areas.

W e have v e r i f i e d

the e mp l o y m e n t figure of an esta b l i s h m e n t

found in the d i r e c t o r y w e u s e d does not cor r e s p o n d to the
employment code g iven for the same e s t a blishmen t
and Bradstreet,

Reference B o o k of M a n u f a c t u r e r s

29
Bradstreet, 1970].
These cases
nor are the cases

in the Dun n
[Dunn and

are pr oba b l y not v e r y numer ou s

of o m i s s i o n of es tablishments.

cated in the introduction,

As

the in f o r m a t i o n c o n t a i n e d

indi­
in this

Di r e c t o r y of Key Plants was g a t h e r e d from " i n f o r m e d local
agencies",

state and local

po nde nce w i t h the plants

indus tri al d irect ories

them sel ves

and c o r r e s ­

af ter the Census Bureau,

w hic h was a p r e s u m a b l y com plete but c o n fidential C l a s s i f i e d
Industrial D i r e c t o r y , ha d in di cate d "prett y m u c h w h a t to loo k
for,

namely,

that in each county there w e r e so m a n y plants

a gi ven size in s p e c i f i e d 4-digit
[U.S.

Bur e a u of the Budget,

of the omissions.

And,

1967].

(sic)
This

classifications"
sho u l d pr eve nt most

in fact, we h a v e - v e r i f i e d from the

Census Bu re au 's Coun t y B u s in ess Patterns
of m a n u f a c t u r i n g e s tablishments

data on the n u m b e r

that are in the cou n ties and

where the number of m a n u f a c t u r i n g e s tablishment s w i t h
more empl oyees

?Q

of

is zero or v e r y small,

500 or

the two sources

These codes (W = 1.000 and over, V = 500 to 999, T =
100 to 499, etc.) are not pr e c i s e enough to be u s e d directly.

c o r respond c losely

[U.S.

Bur e a u of Census,

counties w h e r e this numb e r is larger,
Plants

1971],

In the

the D i r e c t o r y of Key

contains g e n e r a l l y as m a n y and most of the time more

estab lishments

th an County Business Patte rns

There is one n o t i c e a b l e exception.
Business

Patterns

In Mac o m b county,

30

County

indicates there w e r e 23 m a n u f a c t u r i n g

esta bli shm ents w i t h 500 or m o r e em ployees
d ire c t o r y indicates
e sta blis hm ents

indicates.

the emp loy men t

in 1960.

is o ccu r r i n g generally,

in 1959.

The

figure of o n l y 13 such

Since this is the o p p o s i t e of wha t
we t h ink several

large establish men ts,

many of w h i c h m a y be e s tablishments of the com panies we are
considering,
directory.

have been om i t t e d in that coun ty in the 1960
An o t h e r indic ati on is the fact that the e m p l o y ­

ment of the companies

in our list accounts

for 42.4 p ercen t

of the total m a n u f a c t u r i n g emp l o y m e n t in the two states,
for 51 p ercent

in M i c h i g a n and 60 p e r c e n t in the D etr oit area

(without Macomb].

Therefore, we dr o p p e d Macomb cou n t y from

our data for the reg r e s s i o n runs p e r f o r m e d w i t h the m o d i f i e d
BTA or the counties

as units of ob servation.

In the r e g r e s ­

sions u sing the BTAs, we a d j u s t e d the 1960 Mac o m b figure for
the em p l o y m e n t of the largest c o rporations to 60 percent of
the total m a n u f a c t u r i n g em p l o y m e n t and also c o n d u c t e d one
regression run wi t h o u t the w h o l e Detroit area.

30

A part of this dif f e r e n c e ma y be due to the fact
that we are comp a r i n g the 1960 D i r e c t o r y of Key Plants
wit h the 1959 Coun ty Business Pattern.

104
W i t h respect to ot her varia bles , w e only m e n t i o n that
the v a r i a b l e r e f l e c t i n g the d i s t a n c e of one area from a nothe r
was simp ly m e a s u r e d w i t h a r u ler on the Ra nd M c N a l l y Atlas
map of the BTAs

[Rand McNally,

1970].

We m e a s u r e d the d i s ­

tance from the m a i n ce nter of an area to the m a i n ce nte r of
another.

The v a r i a b l e

the p e r i o d 1931

to 1960.

is an a verage t e m p e r a t u r e over

C H A P T E R IV

TH E FINDI NGS OF TH E R E S E A R C H

The Geog r a p h i c D i s t r i b u t i o n of the E m p l o y m e n t
of the Largest M a n u f a c t u r i n g Co rporations
and its 'Relation to A r e a Gro w t h in
M i c h i g a n and C a l i f o r n i a
W h e n we discussed,

in Ch a p t e r

I, the p r o b l e m i n v e s t i ­

gated in this research, we o b s e r v e d that the p o p u l a t i o n an d
econo mic act ivi ties

of this c o u n t r y have been p r e d o m i n a n t l y

settl ing into m e t r o p o l i t a n areas,

e s p e c i a l l y into the s u b ­

u rban ring of the largest S M S A s .

W e s u g g e s t e d that this

trend m a y be c losely a s s o c i a t e d w i t h the c o n c e n t r a t i o n of
the control of e c o nomic act i vities w i t h i n the hands of the
largest m a n u f a c t u r i n g c o r p o r a t i o n s
that their ch oic e of loc ations

and fo rmally h y p o t h e s i z e d

is the m o s t im por tant factor

accounting for area d i f f e r e n t i a l s

in the grow t h of ec on om ic

activities.
This hyp o t h e s i s has be en tes ted w i t h observ a t i o n s
the states

for

of M i c h i g a n and C a l i f o r n i a an d the results are

r e p o r t e d and discu s s e d

in the sec ond se c t i o n of this chapter.

In this se c t i o n we describe,

for these two states,

the g e o ­

graph ic d i s t r i b u t i o n of the ac tiviti es of the largest firms,
the p o p u l a t i o n and total

eco nom ic a c t i v i t y and w e o bserve in

105

106
parallel

the ch ang e in e m p loyment of the firms considered,

the cha nge

in p o p u l a t i o n and total emp l o y m e n t in rural-

ori en ted B T A and s e l ect ed groups of u r b a n - o r i e n t e d BTA.
Ou r o b s e r v a t i o n s
Table 14 shows

14 and IS.

that the largest firms have appro x i m a t e l y

92 p e r c e n t of their
employ men t

are p r e s e n t e d in Tables

es tablishments

in u r b a n - o r i e n t e d

and 96 per ce nt of their

areas.

75 p e r c e n t of their empl oym ent

They have m o r e than

in the five largest areas,

those in cl udin g an S M S A w i t h a p o p u l a t i o n of at least one
m i l l i o n people.
establish ment s
areas has

It also shows that the p r o p o r t i o n of their
and emp l o y m e n t in the ring counties of these

increas ed importantly betwe en 1960 and 1970.

Finally, we can see that the firms c o n s i d e r e d ope n e d man y
more n e w e s t ablishments

and h i r e d m a n y mo re n e w employees

in C a l ifornia than in Mi chi gan ,
areas

in u r b a n than r u r a l - o r i e n t e d

and in the ring th an the centr al counties of the largest

areas.
If we compare T able 14 and Ta ble 15, we note that the
act iv ities of the largest c o r p o r a t i o n s
concentrated

are s u b s t a n t i a l l y more

in a few large areas than the p o p u l a t i o n and

total econo m i c activ iti es

are.

This

is certa i n l y consi ste nt

w i t h the idea that these are their p refe r r e d areas
We also observ e that,

betwee n 1960 and 1970,

the d i s t r i b u t i o n of the pop ulation,
total m a n u f a c t u r i n g empl o y m e n t has
as the changes
largest

firms.

of location.

the changes

in

total emp loyment and
foll owed the same pa ttern

in the d i s t r i b u t i o n of the act ivities of the

107
Ta ble 14.

Num b e r of Em pl oyees of the Larg est C o rpora tions in
Establis h m e n t s w i t h 500 or M o r e Em ploy ees and
Num b e r of Such E s t a b l i s h m e n t s in S e l e c t e d Groups
of Areas, M i c h i g a n an d Ca lifornia, 1960 and 1970.

Emplc>yees
1960

Establishments
1970

1960

1970

Michigan

579,400

595,700

199

219

Califor nia

470,000

585,400

184

247

1, 049 ,400

1, 181,100

383

466

36,500

38,100

30

31

1,0 11, 300

1,14 0,000

351

432

810,000

916,300

289

354

605,800

583,600

224

243

204,200

332,700

65

111

201,300

223,700

62

78

Both States
BTA w it h o u t S M S A s 1
BTA w i t h S M S A s 1
SMSAs of Popula tio ns
Greater than 1
Mi l l i o n
Central

Counties

Ring Counties
SMSAs of Populations
Less than 1 M i l l i o n

4L1U1I
Mi c higan

55.2

50.4

52.0

47.0

Califo rni a

44.8

49.6

48.0

53.0

1 0 0 .0

1 0 0 .0

1 0 0 .0

1 0 0 .0

3. 5

3.2

7.8

6.7

96.4

96. 5

91. 7

92.7

SMSAs of Pop ulations
Greater than 1
M ill ion

77. 2

77.6

75. 5

76.0

Central Counties

57. 7

49.4

58. 5

52.1

Ring Counties

19. 5

28.2

17.0

23.8

19.2

18.9

16.2

16.7

Both States
BTA wi t h o u t S M S A s 1
BTA with S M S A s 1

SMSAs of Po pul ations
Less than 1 M i llion

Sum of Basic Tr adi ng Areas with and wi t h o u t SMSAs does not
add to two states total b ecause some counties of both states
are part of BTA's of ot her states and some BTAs of the two
states include counties of ot her states.
Source:

C o m puted from A p p e n d i x T a ble 1.

108
Table 15.

Population, Total Employment and Total Manufacturing Employ­
ment in Selected Groups of Areas, Michigan and California,
1960 and 1970.

Population

1960

1970

Total
Employment
1960

1970

Total
Manufacturing
Employment
1960

1970

lllUUdCUUl^
7,823

8,875

2,727

3,253

1,036

1,169

California

15,717

19,953

5,761

7,485

1,391

1,615

Both States

23,540

28,828

8,488

10,738

2,427

2,783

2,485

2,842

821

948

184

207

20,905

25,821

7,612

9,728

2,225

2,553

SMSAs of Populations
Greater than
1 Million

16,178

20,022

5,973

7,676

1,792

2,059

Central Counties

12,196

13,989

4,578

5,365

1,354

1,404

3,982

6,033

1,395

2,311

437

655

4,727

5,799

1,639

2,052

433

494

Michigan

33.2

30.8

32.1

30.3

42.7

42.0

California

66.8

69.2

67.9

69.7

57.3

58.0

Both States

100.0

100.0

100.0

100.0

100.0

BTA without SMSAs1

10.6

9.9

100.0
9.7

8.8

7.6

7.4

BTA with SMSAs1

88.8

89.6

89.7

90.0

91.7

91.7

SMSAs of Populations
Greater than
1 Million

68.7

69. S

70.4

71.0

73.8

74.0

Central Counties

51.8

48.5

53.9

49.7

55,8

50.4

Ring Counties

16.9

20.9

16.4

21.4

18.0

23.5

20.1

20.1

19.3

19.0

17.9

17.8

Michigan

BTA without SMSAs*
BTA with SMSAs1

Ring Counties
SMSAs of Populations
Less than 1 Million

SKEAs of Populations
Less than 1 Million

Sum of Basic Trading Areas with and without SMSAs does not add to two
states total because some counties of both states are part of BTAs of
other states and some BTA of the two states include counites of other
states.
Source:

Computed from U.S. Bureau of the Census, 1970 and 1960 Census
of Population, PC(1)-Al and PC(1)-C, and Appendix Table 1.

109
The last o b s e r v a t i o n sugge sts a cl ose a s s o c i a t i o n
bet ween the ch ang e in the emp l o y m e n t of th e large st c o r ­
por ations and the ch ang e in p o p u l a t i o n and total
activities of an area.

This

sugge s ted in Table 16.

W h e r e the p e r c e n t a g e

the acti vit ies

of the firms

association

econo mic

is more d i r e c t l y
increase

is low or negative,

in

the p e r ­

centage ch ang e in p o p u l a t i o n and eco nom ic ac tivit ies is
low.

C a l i f o r n i a has grown at a much fa ster rate.

This

corre sponds c lose ly to the changes o b s e r v e d in the number
of employe es of the largest firms.
Littl e m o r e can be said about the r e l a t i o n s h i p
illustrated w i t h t h e s e data w i t h o u t

a m o r e pr e c i s e analysis

to w h i c h w e now turn.
The Results

of the Statistical A n a lysis

The Linear Functions
Basic Tradin g Area as the Unit of O b s e r v a t i o n
T abl e 17 contains

the simple c o r r e l a t i o n m a t r i x of

the var iables used in this analysis
III.
cases,

and de f i n e d

It must be n o t ed that the table includes,

in Ch a p t e r
in some

al t e r n a t i v e m e a s u r e m e n t s of the same v a r i a b l e or

variables w hich do not enter s i m u l t a n e o u s l y into the same
regression.

Therefore,

we must not be surp r i s e d to see

some ext remely high c o r r e l a t i o n co eff icients.

It remains

that we have a few cases of ex p l a n a t o r y v ari a b l e s s u b ­
stan tia lly c o r r e l a t e d w hich do enter s i m u l t a n e o u s l y
regression.

These cases will be discussed.

in the

Table 16,

Percentage Change of Population, Total Employment, Total Manufacturing Employment and Employment of the Largest
Corporations Between 1960 and 1970 and Employment of the Largest Corporations as Percent of Total Employment and
Total Manufacturing Employment in Selected Groups of Areas, Michigan and California.

Population

Total
Employment

Total
Manufacturing
Employment

Large
Corporation
Employment

Large Corporations Employment
as Percent of
Total
Employment

BTA without SMSA
BTA with SMSA
SMSAs of Populations
Greater than
1 Million
Central Counties
Ring Counties
SMSAs of Populations
Less than 1 Million
Source:

13.4
27.0
22.4
14.3

19.3
30.0
26.5

12.8
16.1

2.8
24.6

14.7
12.8

12.6
4.4

14.7

14.9

1960

1970

1960

1970

21.2

18.3
7.8

51.0
36.3

4.4

10.9
4.0

55.9
33.8
43.2
19.9

12.8

13.3

11.7

45.5

44.7

13.1
-3.7

13.6
13,2

11.9
10.9

45.2
44.7

44.5

8.2
12 .4

42.4

23.5

15.3
27.8

23.8
14.7

28.5
17. 2

SI. 5

65.6

3.6
49.8

62.9

14.6

14.4

46,7

50.8

22.6

25.2

14.1

11.1

12.3

10.9

46.5

45.2

Computed from Tables 14 and IS.

18.4

41.6

110

Michigan
California
Both States

Total
Manufacturing
Employment

Table 17.

Correlation Matrix of the Variables Included in the Regressions with the Basic Trading Area
as Unit of Observation, Michigan and California.

Variable

No,

1

2

3

4

5

6

7

8

9

10

11

12

Comparative Gain

01

1.00

Employment-60

02

.74

1.00

Large Fiims

03

.92

.90

1.00

Government

04

.26

.12

.14

1.00

Education

05

.61

.41

.49

.27

1.00

Temperature

06

.33

.17

.21

.85

.40

1.00

Wage Rate

07

.19

.29

.19

.11

.41

.22

1.00

Land

08

.72

.57

.66

.45

.39

.49

.15

1.00

Distance

09

-.31

-.29

-.23

-.28

-.39

-.51

-.54

-.43

1.00

Dumny

10

.39

.16

.24

,91

.45

.91

.09

.48

-.32

1.00

Employment-70

11

.76

.99

.91

.13

.41

.18

.29

.58

-.29

.16

1.00

Expected Employment

12

.74

.99

.90

.12

.42

.17

.29

.58

-.29

.16

.99

1.00

Unadjusted Gain

13

.97

.86

.97

.23

.69

-.29

.31

.88

.87

.59

13

1.00

112
Th e r e g r e s s i o n statistics
X^,

the c o m p a r a t i v e

trial structure,
in T able 18.

for the f u n c t i o n relat ing

gain in em ploymen t a d j u s t e d for i n d u s ­

to the vari a b l e s X 2 to X^q are reported

We o bs erve that the v a r i a b l e

change in emp l o y m e n t of the larges t firms
significant.

It c ontri butes

31

(Beta w ei ghts

and it is the only one w ho se o m i s s i o n w o u l d

s u b s t a n t i a l l y re duce th e R

2

(R

2

dele t e = .78).

of 3.28 for the coe f f i c i e n t m e a n s
em plo yment of the largest firms
ties

is the most

the mo s t to ward e x p la ining

the v a r i a b i l i t y of the d e p e n d e n t v a r i a b l e
= 1 .1 0 )

m e a s u r i n g the

that an incr eas e

genera tes

c o m pared to an area w h e r e there is no chan g e

the area,

in the

econ omi c a c t i v i ­

in an area in such a way that it gains

activities,

Th e valu e

employment,

as

in their

b y m o r e than three times the v a lue of X^ in

other i ndependent v ariables a s s u m e d constant.

The on ly ot her si g n i f i c a n t coefficie nts,
perce nt level of conf ide nce ,

at the 95

are the coeffi c i e n t s

of the

v a r i a b l e m e a s u r i n g the level of e d u c a t i o n of the p o p u l a t i o n
which,

as expected,

scale v a r i a b l e

is p o s i t i v e an d the coe f f i c i e n t of the

(total employment in 1960).

a g r icultura l land

Th e v alue of

(Xg ) is s i g n i f i c a n t at the 90 per ce nt

level of confidence.

The fact that Xg

(distance to SMSA)

is not s i g n i f i c a n t contr adic ts B u r row's observat ion ,

31

but

The B e t a weig h t is a s t a n d a r d i z e d r e g r e s s i o n c o ­
efficien t that measu res all var i a b l e s in terms of their
s t a ndard error.

Table 18.

Regression Statistics for the Function X, = f(X7,. . •»Xin), Unit of Observation:
Michigan and California.

Variable

Constant

Regression
Coefficient

Standard
Error of
Coefficient

T
Value

Significance

Beta
Weights

R2
Deletes

BTA,

Partial
Correlation

2124

X2 , Employment-60

-.025

.066

-3.79

.001

-.41

.91

-.54

Xj,

Large Firms

3.28

.359

9.14

<.0005

1.10

.78

.84

X^,

Government

2.20

.10

.917

.01

.93

.02

Xg,

Education

X^,

21.0

673

311

2.16

.037

.14

.93

.34

Temperature

- 597

438

-1.36

.181

-.17

.93

-.22

Xy,

Wage

- 458

4422

- .10

.918

-.01

.93

-.02

Xg,

Land

7.84

1.78

.084

.13

.93

.29

Xg,

Distance

-1.46

.154

-.10

.93

-.23

1.12

.271

.18

.93

.19

X^q , Dumny
R2
F Value

-36.9
10542

4.40
25.4
9421

.935
55.5

<.0005

114
should not

surprise.

The effect of the p r o x i m i t y to an

SMSA m a y be si mp ly that the l argest firms p r e f e r to locate
there a n d we acco unt for that w i t h X^ w h ile Burro ws did
not.

The coefficie nts of v a r i a b l e s X ^ , Xg and X ^ q are

not significant.

This was expected.

First of all,

three varia b l e s

are h i g h l y correlated.

Th e d ummy

these

(X^ q )

is 0 in the areas of M i c h i g a n and 1 in the areas of C a l i ­
fornia,

the tempe rat ure

(Xg)

is 15 to 20 deg re es hig h e r and

the local go vernm ent expe ndi tu res
much in the areas of C a l i f o r n i a
each state,

(X^)

(Appendix T able 1).

the v a r i a b i l i t y of th ese vari a b l e s

small but some areas gain an d others
paratively.

close to twice as

Therefore,

Within

is pr etty

lose employment c o m ­

X^ and Xg w e r e not

included in the

regr e s s i o n runs p e r f o r m e d after this one.

Another nonsigni­

ficant v a r i a b l e w h ose v a r i a b i l i t y

is w a g e rates

is small

(x7).
On e result requires furthe r explanation:
sign of the coe fficient of the scale v a r i a b l e

the n e g a t i v e
(X2).

small v a l u e cannot sur prise since the gain or loss

Its
in

emplo yme nt is a r e l a t i v e l y small n u m b e r as c o m p a r e d to the
size of an area.

The nega tive sign was also expe cte d

even though we observed,
analysis,
areas.

in the pr evio us d e s c r i p t i v e

that large areas are g rowing faster than small

Th e fact that m o s t large areas are gro w i n g faster,

or ga in em pl oy men t on small areas

seems to be the result

of at least two effect s w h ich may play in the same or
o p p osite direction.

First,

the fact that the largest

1X5
corporat ions pr efe r to set tle in some areas rat h e r than
others m a y con t r i b u t e to p r e f e r r e d areas gr o w i n g fast er or
gain employment.

This

is our basic hypo t h e s i s w h i c h is

strongl y su ppo r t e d by the results given.

But the impact

of the inc r e a s e d a c t ivi ty of the largest c o r p o r a t i o n s
un l i k e l y to be the same in small
and la rge

is

(rela tive ly unsettled)

(already a b u n d a n t l y settled)

areas.

area the o peni ng of a n e w large e s t a b l i s h m e n t

In a small
is likely

to have a large employment m u l t i p l i e r effect since it will
attra ct suppli ers and /or p r o c e s s o r s of the p r o ducts of
the ne w e s t a b l i s h m e n t and a n u m b e r of servic e in dustries
to serve the n e w employees and their relatives.

This

should lead to a co m p a r a t i v e gain of that area over the
large area w h ere the openi ng of a n e w e s t a b l i s h m e n t m ay
have none or little em ployme nt m u l t i p l i e r effect
ad dit ive effect)

since the linkages with the n e w e s t a b l i s h ­

ment a l r e a d y exist as well as nume rous
This

(a simple

s ervice industries.

leads to the negat i v e c o e f f i c i e n t we ob served for

the scale variable.
This e x p l a n a t i o n is co nsist ent

and helps us to

u n d e r s t a n d why we h a v e a high p o s i t i v e simple c o r r e l a t i o n
coeff ici ent b e t w e e n the depe n d e n t v a r i a b l e
scale v a r i a b l e

(X^)

and the

(X2) w h i l e we have a n e g a t i v e partial

c o r r e l a t i o n c o e f f i cient b e t w e e n th ese two variabl es.
fact that X 3 (large firms)
and affects

is large

in the

large areas

p o sitively X^ is p r o ba bly what leads us to

The

116
observe a p o s i t i v e simp le c o r r e l a t i o n b e t w e e n
scale variable,

even though the d i s tinct sc ale effect on

Xj might be negative,
coefficient.

This

X 2 and X^ move

and the

as s u g g e s t e d by the r e g r e s s i o n

is p r o b a b l y why,

ho l d i n g X 3 constant,

in o p p o site direction:

(rx x

*x

12

= ~ .54).

3

This dive r g e n c e betwe en the signs of the si mpl e and
partial c o r r e l a t i o n co efficients

of X^ and X 2 w o u l d not

occur if X£ and X^ w e r e not correlated,

r^ x
= .896.
2 3
Therefore we have a m u l t i c o l l i n e a r i t y p r o b l e m in this
function.

A l t h o u g h r e g r e s s i o n th eor y in dicates th at it

is diff i c u l t

in such cases to se parate the di stinc t effects

of the two cor r e l a t e d regressors,
present

case,

it seems

that,

in the

the r e g r e s s i o n t e c h n i q u e di d suc ce ed in

sepa rat ing the very dif fer ent effects of X 2 and X 3 on X ^ .
We cannot veri f y
done.

from the results that this was corre c t l y

Fortunately,

we will be in a p o s i t i o n later, w h e n

using the m o d i f i e d ba sic t r ading area as a un it of o b s e r ­
vation,

to check on the v a l i d i t y of this point.

For n o w we can at least m e n t i o n that our i n t e r p r e ­
tation of the scale effect seems

to be c o n s i s t e n t w i t h

the results of two mo re r e g r e s s i o n runs we p e r f o r m e d of
the funct ion d iscussed

(Appendix T a ble 3 and 4).

In one

of them the Detroit area was dr o p p e d from the observations.
In the other the Detroit,

Los A ngele s and Sa n Francisco-

Oa k l a n d areas were dropp ed from the observa tio ns.
three areas are by far our

three largest areas.

These
Each of

117
them includes a v e r y large ci ty or well d e v e l o p e d i n d u s ­
trial p r o d u c t i o n and s ervic e center w h e r e the arrival of
a new large establishment m a y hav e on ly an a d d itive ra ther
than a m u l t i p l i c a t i v e effect.
has a com p a r a t i v e

loss

In fact,

the Detro it area

in emp loyment des p i t e a small

increase in the act ivit ies

of the lar ges t firms w h ile the

ot her two ha ve a co m p a r a t i v e gain a l t h o u g h smaller than
expe cte d gi ven the large incre ase
largest firms

(Appendix Table

in the ac tivites

1).

The results of the

re g ression sugges t c l e a r l y that the n e g a t i v e

scale effect

we identified a bov e wa s d e t e r m i n e d by these areas.
the r e g r e s s i o n wi t h o u t the De tro it

the three areas

In the r e g r e s ­

the co e f f i c i e n t of X 2 is

sign ifi can t but p o s i t i v e ra th er than ne gative.
note that

In

area the c o e f f icient

of X 2 is still n e g ative but n o t si gnificant.
sion w i t h o u t

of the

in both re gres sio ns,

Let us

the c o e f f i c i e n t of X^ remains

sign ifi can t despi te the fact that the range of va r i a b i l i t y
of both X^ and X^ has been d r a s t i c a l l y r e d u c e d by the
omiss ion of these areas.
The next f u n c t i o n est im a t e d
model.

is a som ewh at differe nt

T h e d ependent v a r i a b l e is no longer the c o m p a rative

gain in emp lo yment but the total employment

in 1970

(X^)

which is r elated to the same set of e x p l a n a t o r y varia b l e s
as above.
The results (Table 19), espe c i a l l y the extremely
2
high R , m a y suggest that the f u n ction for mulated is no th in g
else than an identity.

In fact,

it is not.

It w o u l d be an

Table 19.

Regression Statistics for the Function Xn - f(X7,. . .,Xin) » Unit of Observation:
Michigan and California.

Variable

Constant

X-, Employment-60
xv

Large Firms

V

Education
Wage

V
V
b

’

^o*

Regression
Coefficient

Standard
Errors of
Coefficient

T

Significance

Value

Beta
Weights

R2
Deletes

BTA,

Partial
Correlation

-51,664

1.20

.008

3.89

.43

<.0005

.94

.85

.999

8.99

<.0005

.06

.999

.83

.002

.01

.999

.48

.98

.00009

.999

.004

148

1,176

357

3.29

143

5381

.03

Land

7.45

5.39

1.38

.175

.006

.999

.222

Distance

1.08

27.57

.04

.969

.00014

.999

.006

.08

.934

.00027

.999

.013

Dumny

R2
F value

324

3897

.9997
21,078

<.0005

1X9

identity

= X 2 + x 3) if X 3 , the c h a n g e in the e m p l o y ­

(Xu

ment of the largest firms c o v e r e d the total e m ployment
But X 3 r e p resents on l y in ave rag e

ch ange in these areas.
5.7 per cent

of the total employment

w i t h the results

obtained,

change.

We c an sugge st

the e x t r e m e l y sig n i f i c a n t c o e f ­

ficient of X 3 , that th e cha n g e in the ac tiviti es of the
largest firms is a very strong i n d i c a t i o n of wh a t will
ha ppen to total emp loy men t cha nge in an area.

This

is

simply a nother way of e x p r e s s i n g the basic hy pothesis we
formulated.

It appears to be s t r o n g l y supported.

no surprise,

of course,

in 1960

is the most

to pr edict

to see that

the total employ men t

in 1970 when we no te that

in 1970 varies

smallest area to 3,370,878

from 9,954

in the largest.

f u n ction explains

of the areas,

the total e m p loyment

important v a r i a b l e of a fun ction de signed

this total empl oyme nt

X 3 in this

It is

in the

The v a r iable

only the cha n g e in e m p loyment

w h o s e range of v a r i a b i l i t y is m u c h smaller.

In the next function, we a t t e m p t e d to an sw er Burro w's
c rit icism that a mo del

such as ours

ar b i t r a r i l y co nstrains

Y •i
to 1 the coeff ici ent of the c o n s t r u c t e d variable £X .
i si X*l
which serves

to corr ect

for in dustria l stru c t u r e w h e n c a l ­

culatin g the comparative gain in employment.
structed v a r i a b l e

was there f o r e

This c o n ­

inc lud ed in a fu nction

w h ose de pendent v a r i a b l e is the total em ploym ent
(X^)

and whic h

less X £ •

in 1970

includes our o ther ex p l a n a t o r y var iables,

The results are shown in T able

20.

The c o e f f ici ent

Table 20.

Regression Statistics for the Function X,-, = f(X,,. . .,X,n,X.O, Unit of Observation:
BTA, Michigan and California.

Variable

Constant
Xj,

Large Firms

Xg,

Education

Xy,

Wage

Xg,

Land

Xg,

Distance

X^g, Dummy

Regression
Coefficient

R2
Deletes

T
Value

Significance

Beta
Weights

9.04

<.0005

.06

.999

.83

Partial
Correlation

-34050
.38

3.40
881

308

2.86

.007

.009

.999

.43

-465

4654

-.10

.921

-.000

.999

-.02

1.96

.057

.007

.999

.31

9.15

4.7

-19

24

-.80

.430

-.002

.999

-.13

1574

3371

.47

.643

.001

.999

.08

<.0005

.941

.852

.999

Expected Employment

.97

R2

.9998

F Value

Standard
Errors of
Coefficient

28196

.006

171

121
of X j 2 i-s 0*97 and is h i g h l y significant.
fore,

It seems t h e r e ­

that we did not intr o d u c e any impor t a n t d i s t o r t i o n

in our m o del by u s ing this v a r i a b l e as we did in m e a s u r i n g
the c o m p a r a t i v e gain in employment.
The above result does not e s t a b l i s h however,

the

importance of ma k i n g the adj u s t m e n t for structure.

If we

compare the last two functions we can see that the onl y
d iff e r e n c e is that

appears

in one of th em and X 2 in the

other an d b o t h explain about the same p r o p o r t i o n of the
v a r i a b i l i t y of the dependent variable.

Furtherm ore ,

matr i x of c o r r e l a t i o n gi ven in Table 17 indicates

the

that the

co r r e l a t i o n be t w e e n the a d j u s t e d and u n a d j u s t e d c o m p a r a t i v e
gain is high,

0.97.

This

is why,

probably,

the results

of

the function w e esti m a t e d w i t h the u n a d j u s t e d gai n as the
dependent variable,

in an attempt

of mak i n g the adj ustment do not
[Table 21].

This

to d e t e r m i n e the i m portance

lead to a firm conclu sio n,

function explains

a s l i g h t l y larger p r o ­

porti on of the v a r i a b i l i t y of the d e p e n d e n t variable.
Howev er the coef fici ent
significant.

This

of the scale v a r i a b l e

is p r o b a b l y because,

the n e g a t i v e scale effect in the first

is no lon ger

as w e suggested,
function was ca used

by our th ree largest areas, w h i c h have a ve ry small share of
the most r apid ly d eclining industry,
a result,

a g r i c u l t u r e and,

as

an u n a d j u s t e d gain s u b s t a n t i a l l y h i g h e r than the

a djus ted gain

(Appendix Table 1).

Thus

a part of the

in formation gi ven by the fu nction havi n g the adjus t e d gain

Table 21.

Regression Statistics for the Function X., - (X?*1.196) = f(X?,. . .,Xin), Unit of Observation:
BTA, Michigan and California.

Variable

Constant

Regression
Coefficient

.001

X5 , Large Firms
Education

Xy, Wage

.432

1,175

356

143

5,381

Land

7.45

Xg,

Distance

1.08
324

R2
F Value

.008

3.89

Xg,

Xj^q , Dummy

T
Value

Significance

Beta
Weights

R2
Deletes

Partial
Correlation

-51,663

X2 , Employment-60

Xg,

Standard
Errors of
Coefficient

27.6
3,897

.957
117

5.39

.176

.861

.015

.957

.029

8.99

<.0005

.827

.862

.828

3.30

.002

.155

.944

.477

.979

.001

.956

.004

.175

.076

.954

.222

.039

.969

.002

.957

.006

.083

.934

.004

.957

.014

.027
1.38

123

as a depen d e n t v a r i a b l e
u n a d j u s t e d gain.

is lost w h e n we shift to the

The adju s t m e n t has

there f o r e some

importance.

M o d i f i e d Basic Tra ding A r e a as
the Uni t of O b s e r v a t i o n
Let us recall

first that the B asic Tr a d i n g Area s

have b e e n m o d i f i e d by sep arating the centr al f r o m the
ring countie s

of the largest areas,

that we us e here

County B u s iness P a t t e r n rather than Census emp l o y m e n t
data to defi ne the compar ative ga in and that we c o u l d not
make the ad justment

for s tructure w i t h the sou rce of

employment data.
A very import ant adva n t a g e of this m o d i f i e d unit of
o b s e r v a t i o n is that
p r o b l e m we had.

it eli mi nate s

the m u l t i c o l l i n e a r i t y

The c o r r e l a t i o n betwe en the sc ale and

the large firms va ria ble s

is no w -0.02

(Table 23).

is simply because the central count ies

of the large st

areas are m u c h larger than the ring counties
largest

firms

This

in cre ased t heir em ployment

and the

in the ring

counties.
The

results o b t a ined

(Table 22)

strongly c o n f i r m

and improve on w h a t we o b t a i n e d previously.
of the v a r i a b l e large firms

(X^)

Th e c o e f f icien t

is very hig h l y significant.

The scale effect is ne gative and h i g h l y significant.
T va lue of both coeffici ent s

is higher,

The

the p r o p o r t i o n of

the v a r i a b i l i t y of the dep endent varia b l e e xplained

is higher

Table 22.

Correlation Matrix of the Variables Included in the Regressions with the Modified Basic
Trading Areas as Units of Observation, Michigan and California.

No.

1

Unadjusted Gain

01

1.00

X2, Employment-60

02

-.17

1.00

03

.97

-.02

1.00

X4, Government

04

.14

.09

.10

1.00

X5, Education

05

.47

.32

.50

.29

1.00

Xg,

06

.20

.15

.19

.85

.43

1.00

X?, Wage

07

.08

.26

.13

.11

.45

.23

1.00

Xg,

Land

08

.40

.27

.48

.33

.45

.40

.22

1.00

Xg,

Distance

09

-.14

-.27

-.15

-.30

-.43

-.52

-.56

-.36

1.00

IXnuny

10

.22

.13

.19

.91

,46

.91

.09

.38

-.33

1.00

11

-.05

.99

.10

.11

.38

.18

.27

.32

-.29

.16

Variable

X y

Large Films

Temperature

Xjp Employment-70

2

3

4

5

6

7

8

9

10

11

1.00

Table 23.

Regression Statistics for the Function X, = (f(X?). . .,Xin), Unit of Observation:
BTA, Michigan and California.

Variable

Regression
Coefficient

Constant

Large Firms
X^, Government

X?, Wage
Xg,

Land

Xg, Distance
X^g, Dummy

Beta
Weights

R2
Deletes

Partial
Correlation

.006

-4.79

<.0005

-.15

.95

-.61

4.17

.16

26

<.0005

.97

.43

.97

.65

.520

.05

.97

.10

.62

.539

.03

.97

.10

-

.124

-.14

.97

-.24

.531

-.02

.97

-.10

-1.9

.061

-.07

.97

-.29

22.9

223

361

-813

517

-3173

5015

-5.02

2.60

-1.6
-.63

-50

28

-1.78

.083

-.08

.97

-.27

12607

10577

1.19

.241

.13

.97

.19

.968

R2
F Value

Significance

-.03

14.9

Education

Xg, Temperature

T
Value

19856

X2 , Employment-60

Xg,

Standard
Errors of
Coefficient

Modified

130

<.0005

126
and the v a l u e of R

2

del e t e for

has d r o p p e d to

.43, w h ich

confirms

that we have e l i m i n a t e d the m u l t i c o l l i n e a r i t y

problem.

(When one drops a v e r y si g n i f i c a n t variable,

an extre m e l y high beta weight,
substantially,
captu red its

2

does not d e c r e a s e

it indicates that a c o r r e l a t e d v a r i a b l e has

effect.)

of the res ults

if the R

with

A n o t h e r reas o n for the impr ovement

is that the parts of the largest areas w h i c h

were b l e n d e d p r e v i o u s l y and are not s e p a r a t e d beh a v e d i f ­
feren tly w i t h respect both to grow t h and the act ivities
of the largest

firms.

T heir s e p a r a t i o n c e r t a i n l y fac ili tates

the i d e n t i f i c a t i o n of the p o s t u l a t e d effects.
the d i s t r i b u t i o n of the o b s e r v a t i o n s
range in cre a sed

Moreover,

is improve d and their

(Detroit and San F r a n c i s c o - O a k l a n d w i t h o u t

their suburbs have large c o m p a r a t i v e losses, w h i l e their
suburbs have v e r y im por tant c o m p a r a t i v e gains).
We h a v e also
empl oym ent

esti m a t e d the f u n c t i o n w i t h the total

in 1970 as the d e p e n d e n t variable.

The results

are r e p o r t e d in Table 24.
The Cou nty as the Unit of O b s e r v a t i o n
W i t h the co unty as the unit o f o b s e r v a t i o n we es tim ated
our funct ion w i t h the o b s e r v a t i o n s of the two states t o g ether
and with the observ a t i o n s of eac h st ate separately.
each state was

When

t ake n s e p a r a t e l y the sta te rate of gro w t h was

used to c a l c u l a t e the u n a d j u s t e d c o m p a r a t i v e gain.
results are r e p orted in T able 25.

The

Th e e s t i m a t i o n by state

is about equ iv alent to that for the two states together

Table 24.

Regression Statistics for the Function
BTA, Michigan and California.

Variable

Constant
X2 , Employment-60
X3v
X5-

V
X7>

Regression
Coefficient

Standard
Errors of
Coefficient

=» f(X?,. . .,Xin) Unit of Observation:

T
Value

Significance

Beta
Weights

R2
Deletes

Modified

Partial
Correlation

198S6
1.34

.006

240

<.0005

.99

.22

.999

Large Firms

4.17

.16

26

<.0005

.13

.99

.97

Government

14.86

Education

224.7

22.9
361

Temperature

-814

517

Wage

3173

5015

Xg,

Land

V

Distance
Dunmy

-5.02
-50.3
12608

28.3
10577

.52

.006

.99

.10

.62

.54

.004

.99

.11

.99

-.24

-1.6

.12

8187

-.02

-.63

.53

.003

.99

-.10

-1.93

.06

-.009

.99

-.29

-1.78

.08

-.010

.99

-.27

1.19

.24

.016

.99

.19

.9995

R2
F Value

2.60

.65

<.0005

Table 25.

Regression Statistics for the Function X2 = f(X2 ,. . ..X^g) Unit of Observation:

Variable

Regression
Coefficient

Standard
Errors of
Coefficient

T
Value

County.*

Significance

Beta
Weights

R2
Deletes

Partial
Correlation

a) Michigan and California
Constant

15067

X^t Employment-60

-.03

.003

-9.11

<.0005

-.20

.91

- .62

Xj, Large Firms

4.00

.094

42.6

<.0005

.94

.20

.96

-2,5

.015

-.07

.94

-.21

.041

.14

.94

.18

-.14

.94

-.21

Xg, Distance
Xjq Dummy

-25

10

7515

3645

R2
F Value

2. 06

.947
257

<.0005

128

b) Michigan
Constant

-812

X2, Employment-60

-.03

.018

-1.90

.061

Xj, Large Firms

4.19

.25

16.8

<.0005

Xg, Distance

-5.02

R2
F Value

10.0

-.50

.618

.89

.73

.89

-.02

.94

-.06

.94 •
179

<.0005

c) California
Constant

-6988

X2, Employment-60

-.14

.003

-39.3

<.0005

-.83

.35

-.98

Xj, Large Firms

3.64

.116

31.3

<.005

.69

.58

.98

.010

-.06

.97

-.36

Xg, Distance

-40.6

-2.69

.98

R2
F Value

15.1

346

<.0005

*For the variables whose coefficient is significant in at least one of the three regressions.

129
except that in Mic hig an, w h e r e there
county,

is on ly on e v e r y large

the scale v a r iable is not significant.
The L ogarithmic Fuction

The results o f the logarithmic function w e estim a t e d
w i t h our three types of u nits of o b s e r v a t i o n are g i v e n in
Table 26.

are som ewh at puzzling.
W i t h the
2
BTA as unit of ob servation, th e R
is v e r y low and the
whole

Th ese results

function is not significant

(F v a l u e - .115).

Wi th

the m o d i f i e d BTAs or the countie s as units of obs erva tio n,
2
the R
and F values are very high, the co e f f i c i e n t of X 3
is hig h l y sign ifi cant an d the R

d e l e t e for

est of all the functi ons we have estimated.
the p rint out

is the l o w ­
We c hecked

for error in the input on a var iable,

but

found none.
If the three results w e r e very similar, w e w o u l d
sugg est that a log ari thm ic e s t i m a t i n g eq uation repres ent s
a m i s s p e c i f i c a t i o n of our function.

But,

this is not

the case.
A n o t h e r p o s s i b l e ex p l a n a t i o n is that the diffi c u l t i e s
come from the fact that,
tion,

in a l ogar ithmic

estima tin g e q u a ­

the u p p e r ranges of the d i s t r i b u t i o n be ing sc aled

down and the lower ranges c a l l e d ’up, the sm a l l e r ob servation s
are g iven a heavie r weight.

Since,

as we observed,

activities of the largest firms are no t numer ous
change m u c h in the smaller areas,
Xj is s u b s t a n t i a l l y reduced.

the

and do not

the total v a r i a b i l i t y of

It is u n l i k e l y however,

that

Table 26.

Regression Statistics for the Function:
and California.

Variable

Regression
Coefficient

a) Unit of Observation:

BTA

Constant

13.5

Xj, Employment-60

-.74

.35

.11

.18

Xj, Large Firms
Xp, Education

.09

R“
F Value

.05

-2.1

.04

-.57

.16

-.33

.61

.54

.10

.24

.10

1.83

.07

.34

.19

.29

1.80

.12

Modified BTA
1.22

X£, Employment-60

-.03

.02

-1.17

Xj, Large Firms

1.14

.01

91

X., Education

-.006

.004

-1.52

<.0005
.14

-.02
.99

.997
.31

-.19
.99

-.02

.997

-.24

.265

-.009

.997

-.10

<.0005

.99

<.0005

1343

County
.40

Constant
X^t Employment-60

-.005

.004

Xj, Large Firms

1.15

.006

Xr, Education

-.002

.0009

-1.1
136
-2.5

.014

.997

R2
F Value

.25

.997

R2

c) Unit of Observation:

Partial
Correlation

Significance

.25

Constant

F Value

Beta
Weights

R2
Deletes

T
Value

130

b) Unit of Observation:

Standard
Errors of
Coefficient

lnX. = f(lnX-, lnX,, X., X c, lnX,, X 7 , X;,, ln X Q , X . n ), Michigan
1
1
*
*
5
0
7
a
9
1U

4397

<.0005

-.02

.12
.997

.99
-.21

131
this alone c o uld ex p l a i n wh y w e get such totall y d i f f e r e n t
results w h e n we m o d i f y the BTAs.
tion ma kes a di fference.

O f course,

It inc reases

this m o d i f i c a ­

the n u m b e r of areas

wh er e the largest firms have n u m erous activities.

Moreo ver ,

it se par ates the ve ry large and r e l a t i v e l y s t a gnant central
counties w h e r e the large firms d e c r e a s e

their activi ties

from the small er but r apidly g r o w i n g ring c ount i e s w here
they increa se their activities.

The total v a r i a b i l i t y of

both the dependent v a r i a b l e and

is therefore g reater

than w i t h the BTAs in w h i c h c entral and ring co unties are
blended.

W e c a n t here f o r e expe ct bett e r r esult s w i t h the

m o d i f i e d BTAs or the c oun ti es as units

of ob servation,

but

not such gr e a t l y d i f f e r e n t results.
We t hink ano t h e r e x p l a n a t i o n can be found if we e x a ­
mine more close ly the l o g a r i t h m i c and n o n l o g a r i t h m i c observ ations of X^ and X^ for a few small

32

and our large areas

on both the m o d i f i e d and n o n m o d i f i e d form.
Table

27 can be u s e d for that purpose.

o bserve

in this table

The data of

Th e first th ing we

is that there are n e g a t i v e values.

The logar i t h m of the v ariables ca nno t there f o r e be o b t ained
wi t h o u t m o d i f i c a t i o n of the v ariables
neg at ive values.

to e l i m i n a t e the

To achieve that we d e c i d e d to add to each

o b s e r v a t i o n the most negative v a l u e plus

32
The first three areas
names.

1.

In the case of

in a l p h a b e t i c a l order of their

132
T abl e 27.

Log a r i t h m i c and N o n l o g a r i t h m i c O b s e r v a t i o n s for
V ari ables X, and X, in S e l e c t e d BTAs and M o d i f i e d
BTAs.

lnXx

X1

X3

lnX3

0 .00

BTAs
A dri a n

-54

10.212

-2,300

Alpena

-2,629

10.112

0

7.741

Battle Cree k

-5,951

9.968

-1,300

6 . 909

3,100

8.594

Detroit

-27,274

0.00

Los A ngeles

145,772

12.061

57,900

11.005

San Fra nciscoO akl and

101,436

11.765

29,500

10.367

Adrian

-1,020

12.160

-2,300

10.386

Alpena

-283

12.163

0

10.454

Battle Creek

-6,693

12.129

-1,300

10.416

Wayne Co unty

-191,944

Detroit Ring

105,045

12.601

28,100

11.048

-8,768

12.118

9, 200

10.690

Los A n g e l e s Ring

185,185

12.840

48,700

11.331

San FranciscoO a k l a n d Co unty

-29,202

12.000

-13,600

9,957

San FranciscoOak l a n d Ring

189,383

12.851

43,100

11.261

M o d i f i e d BTAs

Los A ng eles Cou n t y

Xj w e added

0.00

-34,700

0.00

27,275 to the v alue o f Xj in each area.

Taking

the l o g a r i t h m we got a very p a r t i c u l a r type of d i s t r i b u t i o n
of observations:

0.0 v alue at one end of the di str ibutio n,

wi th the o t h e r o b servat ions at the o t h e r end of the d i s t r i ­
bution w i t h values va r y i n g fr om 9.71 to 12.06.
of X 3 , the most n e g a t i v e v a lue was

-2300.

In the case

A d d i n g 2301 to

133
each o b s e r v a t i o n and tak ing the l o g a r i t h m we got a gain a 0.0
value at one end of the distribu tio n.

The o b s e r v a t i o n s

for

X 3 are more evenly d i s t r i b u t e d over the ra nge of their v a r i ­
ation than is

simp ly b e c a u s e the v a lue a d ded to eli minate

the n e g a t i v e val ues
the p r o c e d u r e

is m u c h smaller.

We can n o t e also that

follo wed to cha n g e to l o g a r i t h m i c o b s e r v a t i o n s

has d r a s t i c a l l y change d the p o s i t i o n of some areas r e l a t i v e l y
to others.

The v alue of X ^ , in Ba ttle C r e e k is m u c h cl oser

to that of D etroit than o f Los Angeles.

For lnX^,

in B a t t l e C r e ek is clos e r to that of Los Angeles.

the value
S i nce the

area w i t h the 0.0 value is not the same for X^ and X^,
r e g r e s s i o n results

the

c o uld h a r d l y be good.

W h e n we tu rne d to the m o d i f i e d B T A as u n i t of o b s e r v a ­
tion, W a y n e cou nty had the m o s t n e g a t i v e v alue for both X^
and X 3 and as a re sult had the 0.0 l o g a r i t h m i c o b s e r v a t i o n
for both var iables.

Moreover,

the values a d d e d to e l i m i n a t e

the n e g a t i v e va lue s b e i n g large for b o t h variab les , w e hav e
a two tail d i s t r i b u t i o n in w h i c h all the val ues

except the

0 . 0 are so closely b u n c h e d that we can almost c o n s i d e r t h e m
as one observation.
tive observations.

Thus w e have in effect on ly two e f f e c ­
The r e g r e s s i o n results are ext remely

ni ce but meaningless.
same reasons,

The same thing ca n be said,

of the results o f the lo g a r i t h m i c

for the

f u n c tion

using the countie s as unit s of obs ervation.
This

disc u s s i o n s t r ongly suggests

di f ficulties

that ther e are

involved in fo r m u l a t i n g a lo g a r i t h m i c e s t i m a ­

ting e q u a t i o n if there are n e g a t i v e v a l u e s among the

134
n o n l o g a r i t h m i c observations.
ways

Th ere are,

to get aro u n d these problems.

observa tio ns

of course,

some

One is to add to the

a larger v alu e than the most n e g a t i v e one to

avoid the 0.00 lo g a r i t h m i c o b s e r v a t i o n s and the type of
d i s t r i b u t i o n we had.

This

is w h a t w e did bef o r e p r e c e e d i n g

to a f ur ther e s t im ation of this fu nctional

form.

We adde d

to each o b s e r v a t i o n a p p r o x i m a t e l y twice the v a lue of the
most n e g a t i v e observation.

This gave us a m o r e nor m a l type

of d i s t r i b u t i o n of obser vat ion s,

as is sugg e s t e d in Table

28, and the r e g r e s s i o n resul ts r e p o r t e d in T a ble 29.
results,

gr ossly speaking,

wi th the n o n l o g a r i t h m i c

These

con f i r m the resul ts o b t a i n e d

esti m a t i n g equation as well as the

ratio nal e s ugge s t e d to explai n the dif f e r e n c e s b e t w e e n the
results o b t a i n e d w i t h the BTAs a n d m o d i f i e d BTAs.
It m a y be s u g g e s t e d that an o t h e r way to avoid the
difficul ties met

in e s t imating our l o g a r i t h m i c e q u a t i o n

w oul d be to c o m p l e t e l y a void the log arithms by u s ing a
funct ion in w h i c h the varia b l e s w o u l d be e x p r e s s e d
centage terms.
that it is not
trial

in p e r ­

S i nce some results are r e p o r t e d su g g e s t
imp ortant to make an a d j u s t m e n t

s tructure in comp a r i n g areas*

growth,

for i n d u s ­

the d ependent

var ia ble c ould be the p e r c e n t a g e c h a n g e in total e m p loyment
rather than the c om p a r a t i v e gain.
expre sse d in percentage.
this p r o c e d u r e

Similarly

c o uld be

But we a l r e a d y m e n t i o n e d that

is al mos t ce r t a i n to amplify,

particularly

in the small areas w h e r e there is a very small base fro m

135
Table 28.

L o g a r i t h m i c O b s e r v a t i o n s for
T r a n s f o r m e d V a r i a b l e s X, and
X, in S e l e c t e d BTAs and
M o d i f i e d BTAs.

lnX1

BTAs

lnX3

Adrian

10.914

7.901

Alpena

10.866

8.517

Bat tle Cre ek

10.801

8 . 216

Detroit

10.230

8.999

Los Ange les

12.210

11.049

San FranciscoO akland

11.960

10.449

Adrian

12.855

11.123

Alpena

12.857

11.156

Battl e Creek

12.841

11.138

W a yne County

12.165

10.472

Det roit Ring

13.101

11.494

Los An ge les County

12.835

11.279

Los An gel es

13.252

11.684

San FranciscoOa k l a n d County

12.779

10.940

San FranciscoOak l a n d Ring

13.259

11.636

M o d i f i e d BTAs

Ring

136
Table 29.

Regression Statistics for the Function:
lnXj = f (InX^ lnX3, X 5, X?, Xg, Xg, X ^ ) ,
Michigan and California.1

Variable

Regression
Coefficient

Standard
Errors of
Coefficient

T
Value

Percentage of
Variability
Explained

a) BTA
Constant

8.21 E-0

Xg, Large Firms

3.42 E-l

7.73 E-2

4.41

6.14

E-l

Xg, Land

1.63 E-4

7.88 E-5

2.07

6.71

E-2

Xg, Education

1.44 E-3

5.93 E-4

2.42

5.01

E-2

-6.04 E-2

3.89 E-2

-1.55

1.84

E-2

7.65

E-l

X2 , Employment-60
Total
F Value

b)

17.1

Modified BTA

Constant

3.52 E-0

Xg, Large Firms

8.43 E-l

3.20 E-2

26.3

9.33

E-l

X^, Employment-60

-8.51 E-3

3.78 E-3

-2.25

8.96

E-3

Xg, Land

-1.23 E-S

7.905 E-6

-1.56

2.87

E-3

Xg, Education

-4.15 E-5

1.086 E-4

- .38

1.99

E-4

9.479 E-l

Total
F Value

200

Stepwise regression. Results given only for the variables for which
the T value is higher than 2 in at least on of the regression runs.

w h ich to c a l c u l a t e these percentages,

the m e a s u r e m e n t errors

resulting from the o m i ssion of the em ploym ent of the firms
in establis h m e n t s

smaller than 500 employees.

unless one has access

The refore,

to m o r e pr e c i s e i n f o r m a t i o n sources,

wh en estimating a fu nction of this form he should p r o b a b l y

137
include only the ob s e r v a t i o n of areas or count ies w h e r e the
largest

firms have a r e l a t i v e l y large empl o y m e n t base.

In the p resent case analy sis we do no t have v e r y m u c h
such areas or counties.

We d e c i d e d nev ertheless,

to est imat e

the fu nc tion w i t h the 23 cou nti es of our samp l e w h e r e
largest firms h ad at least 5,000 em plo yees
1970.

We

the

in both 1960 and

included only those variabl es w h o s e r e g r e s s i o n

c oef fic ie nts wer e sign ifi cant
tions p r e v i o u s l y estimated.

in at least one of the f u n c ­
The results,

r e p orted in Tab le

30, a p p r o x i m a t e the results we alrea dy o b t a i n e d a l t h o u g h the
R

2

is somewh at

Table 30.

lower.

Regression Statistics for the Function:

(X-.

- x2> X2 “
f X ^ / X 2 , Xg, Xg, Xg, X10) , Observations for the Larger

Counties Only, Michigan and California.

Regression
Coefficient

Standard
Errors of
Coefficient

T
Value

Percentage of
Variability
Explained

Constant

4.225 E-2

Xg, Large Firms

5.267 E-l

1.185 E-l

4.44

7.99 E-l

Xg, Land

2.019 E-4

5.062 E-5

3.99

6.01 E-2

X 2 , Employment-60

-1.900 E-7

8.750 E-8

-2.17

2.39 E-2

Xg, Distance

-3.307 E-3

1.889 E-3

-1.75

8.75 E-3

X10 Dummy

-2.005 E-l

9.963 E-2

-2.01

7.37 E-3

1.061 E-3

5.685 E-4

1.87

1.81 E-2

Xg, Education

9.17 E-l

Total
F Value

29.4

138
Inferences f r o m the Results
The em pir ical

i n v e s t i g a t i o n c o n d u c t e d shows that,

be t w e e n 1960 and 1970 popul ati on,

total emp loyment,

total

m a n u f a c t u r i n g empl o y m e n t and the empl o y m e n t of the largest
m a n u f a c t u r i n g c o r p o r a t i o n s have e v o l v e d in c l ose a s s o c i a t i o n
w it h i n the vario us areas of M i c h i g a n and California.

The

s tati sti cal

in

analy sis p e r f o r m e d si n g l e d out the cha nge

emplo yme nt of the largest m a n u f a c t u r i n g c o r p o r a t i o n s
dominant fac tor explai nin g total
b etw een these areas.

as the

empl o y m e n t growth v a r i a b i l i t y

The o the r factors

in c luded in the

analysis e xplained a m i n o r p r o p o r t i o n of that va ria bil ity .
The q u e s t i o n n o w is:
result?

wha t ca n be in ferred from this

Does it enable us to c o n c l u d e c a t e g o r i c a l l y that

the choice of l o c ation of these firms causes or pr oduces
area growth d i f f e r e n t i a l s ?

The ans wer is no.

But we can

conclude that the results s upport this hypothesis.

There

are two cat eg orie s of reasons w h y no stronger infe r e n c e can
be derived

from the result:

first,

the wea k n e s s e s we have

i dentif ied

in the analysis p e r f o r m e d and;

second,

as a

general m e t h o d o l o g i c a l matt e r the test of a h yp o t h e s i s
as ours,

no mat ter ho w b road it is and rega r d l e s s

qualit y of the da ta used,

such

of the

does not p r ove its validity.

At

best one can only fail to di sprove the hypothesis.
First we repeat that we p e r f o r m e d only a case analysis.
In a case analysis we

i n t e n t i o n a l l y limit the i n f o r mation

base on w h i c h the analysis

rests.

We,

therefore,

inten t i o n a l l y

139
limit,

for p a r t i c u l a r reasons,

our a b i l i t y to p r o c e e d to a

firm c o n c l u s i o n app l i c a b l e in all situations.
cular case ana lys is we conducted,

there is no d oubt that it

w o u l d have been us eful to have m o r e
large areas.

In the p a r t i ­

i n t e r m e d i a t e s ized and

But the point we m o s t l y want to emph a s i z e here

is related to the p r o b l e m of m a k i n g ca usa l inf er enc es

from

res ea rch results.
Our hy pot hesis,

we recall,

is that the ch oic e of l o c a ­

tion of the large st m a n u f a c t u r i n g c o r p o r a t i o n s

is the d o m i n ­

ant factor acc o u n t i n g for area gro wth diff eren ti als.
asserts,

in fact,

the e xis t e n c e o f a causal r e l a t i o n s h i p in

w h i c h an inc rea se in the emp l o y m e n t of these firms
area causes

It

in one

a co m p a r a t i v e gain in total e m p loyment of that

area over any o t her area w h e r e the firms did no t incr eas e
their activities.

It seems that

in a strict s ense the e x i s ­

tence of such a r e l a t i o n s h i p can not
that causal

"One admits

think ing belong s c o m p l e t e l y on the t h e o r etical

level and that causal
[Blalock,

be proven.

1964,

p.

laws can n ev er be demo n s t r a t e d "

6],

Bl a l o c k suppo rts

this v i e w by

emp has izi ng the n e c e s s i t y we always have to ma ke some
simplifying assu mpt ion s
One of these assum pti ons

about the reality in our models.
is that the effect on the d e p e n d e n t

v a r iable of u n i d e n t i f i e d or u n i d e n t i f i a b l e varia b l e s
negligible.

Th a t is the case of e x p e r i m e n t a l

is

r e s e a r c h as

well since there are no c o m p l e t e l y isola t e d systems.

140
It can be arg ued he re that,

in the r e g r e s s i o n model,

we ha ve a m e a s u r e of the effect of these omi t t e d vari ables:
the residuals.

T hat is true and we c a n say that in our

analysis t h ese re sid uals are v e r y small.
ever is that

Th e p r o b l e m h o w ­

there can be some o m i t t e d v a r i a b l e so h i g h l y

cor re lated w i t h an inclu ded r e g r e s s o r that
con fo unded w i t h the other.

its ef fe ct is

The r e g r e s s i o n eas i l y identi fie s

conflicting or dis t u r b i n g effects on a d e p e n d e n t variable.
It does not

ident ify c o n f o u n d i n g effects.

of view of k n o w l e d g e as such,
turbing.
reality,
tions.

It implies
we always

that,

F r o m the p oin t

this d i f f i c u l t y is q u ite d i s ­

in o u r attempts

to e x p l a i n the

rem a i n wi th theoretical w o r k i n g a s s u m p ­

From a pol i c y point of v i e w or for p e o p l e c o n c e r n e d

with action,

the d i f f i c u l t y ma y be m u c h

un i d e n t i f i e d v a r i a b l e w h i c h

less serious.

The

is so hig h l y c o r r e l a t e d w i t h an

included regre s s o r as to have a co n f o u n d i n g effe ct w i t h it
may have so close a mut ual ca usal r e l a t i o n s h i p w i t h it that
it becomes a m a t t e r of indiff e r e n c e w h e t h e r we act u p o n one
or the o t her of the two variables.
Our i nference is ther e f o r e that the t h e o r etical
hypo the sis

fo rm u l a t e d is c o r r o b o r a t e d by the empirical

tig ati on conducted.

The hy p o t h e s i s

w h i c h it was submitted.
It simply supplies

s u r vived the test to

This does not p rove

some evidence.

inves­

its validity.

The e v i d e n c e c o u l d be

incre a sed w i t h furt her testin g of the hypothesis.

CHAPTER V

SUMMARY AND CONCLUSION

This

r e s e a r c h starte d w i t h an i n v e s t i g a t i o n of the

ef fectiveness o f publ i c po licies and programs d e s i g n e d to
enh ance rural areas gr ow th on the basis of act i v i t i e s and
changes

to be ma de w i t h i n th ese areas,

mor e att r a c t i v e
ing fin ancial

to bu si ness men ,

incentives

These types of programs,

te nding to make them

an d on the basis of s u p p l y ­

to firms to locate

in these areas.

as Del an o's w o r k suggests,

may

well be e f f e c t i v e only for small busi n e s s e s w h o s e impact on
an area ma y be equall y small.

The 1950s and 1960s s e t t l e ­

ment trends c e r t a i n l y do not sugge st that the impl e m e n t a t i o n
of such pr ograms

broug ht about the type of cha nge in the

p o p u l a t i o n and economic activities d i s t r i b u t i o n p a t t e r n
which was

expected in p l a n n i n g these programs and w h i c h is

c o n sidered d e s i r a b l e here.
In an attem pt to ident ify s t r o n g e r p o l i c y tools to
alter in favor of rural areas

the cu rr ent s e t t l e m e n t trends,

we u n d e r t o o k to i nvestigate the s i g n i f i c a n c e of the c o n t r i ­
b u t i o n of the largest m a n u f a c t u r i n g c o r p o r a t i o n s to the
co n c e n t r a t i o n of p o p u l a t i o n and eco nom ic activi tie s
large m e t r o p o l i t a n areas.

in the

More s p e c i f i c a l l y the r e s e a r c h

141

142
was d e s i g n e d to test the h y p o t h e s i s
determinant

that the m o s t

of area gro w t h d i f f e r e n t i a l s

im por tant

is the c ho i c e of

locations o f the l argest m a n u f a c t u r i n g corp or atio ns.
In Ch a p t e r II,

a t h e o r e t i c a l b a s e wa s d e v e l o p e d in

support of this hypoth esis .

L o c a t i o n theo ries w e r e r e v i e w e d

first to find ou t w h a t theo r i s t s have s u g g e s t e d about the
way the total p a t t e r n of l o c a t i o n is gen era ted ,

especially

the reasons wh y it m a y be m o r e c o n c e n t r a t e d th an s o c i a l l y
desired.

Th ese reason s w e r e fo c u s e d arou n d the c o n c epts of

a g g l o m e r a t i o n economi es and d i s e c o n o m i e s ,
internal and external
greatly,

the fact that the

effects of l o c a t i o n d ecis ions d i f f e r

and the lack of c o o r d i n a t i o n of l o c a t i o n decisions.

These factors

in c o m b i n a t i o n w e r e s h o w n to indu ce firms to

locate in large centers.

It w a s a l s o s hown that important

net social be nefits c ould be p r o d u c e d
sions of these firms and families
small centers

on a scale n e c e s s a r y

if the

location dec i ­

c o u l d be c h a n n e l l e d tow ard s
to de v e l o p

the a g g l o m e r a ­

tion economies w h i c h w o u l d convert s u c h c enters
places

into p r o f i t a b l e

in w h i c h to op e r a t e and a t t r a c t i v e pla c e s to live.
The em pi rical o b s e r v a t i o n that m a n u f a c t u r e r s ,

choice of locations,

give m o r e w e i g h t

in their

to their personal

p refer enc es than to the r esults of ben e f i t and cost c a l c u ­
lations

led us

theories.

to chall e n g e th e as s u m p t i o n s of the r e v i e w e d

Previ ous studies w e r e b r o u g h t in suppo rt of the

view that firms do not n e c e s s a r i l y at t e m p t to m a x i m i z e
profits

and, m o r e im portantly,

that the large st

firms have

143
de v e l o p e d great fin ancial strength,
over their economi c environ men t,

and far r e a c h i n g powers

p a r t i c u l a r l y the p o w e r to

adm i n i s t e r pr i c e s - - a l l c h a r a c t e r i s t i c s w h i c h have little
sim i l a r i t y w i t h the w o r l d of p e r f e c t co mpetition.

The

ch allenge of the prof it m a x i m i z a t i o n an d pe r f e c t c o m p e t i t i o n
assum pti ons of l o c ati on theor ies

led us to the co ncl usio ns

that the choice of loc ation o f the larg est m a n u f a c t u r i n g
c o rporations

is rela t i v e l y free 1) w i t h re spect to th e bas ic

l ocati on factors

i d en tified b y the t h e o r i e s - - i .e ., the costs

and mar k e t ad vant ages

found in g iven econ o m i c e n v i r o n m e n t s ,

and 2) w i t h res pe ct to the re l a t e d p o l i c y tools used by
public au tho rities
i.e.,

to influ e n c e f i r m s ’ l o c a t i o n d e c i s i o n s - -

the attempts ma de to m o d i f y the b e n e f i t - c o s t r e l a t i o n ­

ship or to d e c r e a s e or c o m p e n s a t e for the d i s a d v a n t a g e s of
p a r ticular

locations.

expla nat ion s

T he se were p r o p o s e d as

important

for the d e v e l o p m e n t o f the n a t i o n an ove rly

c o n c e n t r a t e d pat t e r n of location and for the wea k ness o f the
current rural d e v e l o p m e n t approach.
To esta b l i s h suppor t for the ne w a p p r o a c h embod ied
our b asic hypothesis

two more steps w e r e left.

in

We had to

show that the free loca tio nal cho i c e of the largest m a n u f a c ­
turing c o rporations has a st rong impact on the cho sen area's
growth and that these firms a lone are in a p o s i t i o n to have
a d ete rminant
growth.

impact on the spatial d i s t r i b u t i o n of e c o nomic

This we did by r e f e r e n c e to aspe cts

of the r e v iewed

theories and to the c h a r a c t e r i s t i c s of the largest firms.

144
We a r g u e d that be c a u s e of their fi nan cial strength,
powers,

the size of the n e w i n v e s t m e n t they can st art w i t h i n

a ne w area,
of parts,

the fact that they are o f ten th eir own s uppliers

comp one nts ,

firms do c o o r d i n a t e
ment,

re pair an d ot her services,

the largest

large amounts of int e r d e p e n d e n t

invest­

they do crea te and in t e r n a l i z e the a g g l o m e r a t i o n

economie s

for w h i c h small

firms have to wait.

Thus they

can not only locate but flour i s h in small as wel l as large
centers.

Be cause of the a g g l o m e r a t i o n ec ono mies

ma de available,

they p o w e r f u l l y attract,

tion not on ly the firms and ind ustr ies
m a n y occupations
them.

they have

to the same l o c a ­

lin k e d w i t h t h e m but

and proce s s e s not e s s e n t i a l l y lin ked w i t h

B e c a u s e they pr o v i d e to an area an importa nt source

of ea rni ng and spendi ng capacity,

they are the o r i g i n of the

dev e l o p m e n t of a large n u m b e r of servi ce activities.
othe r words,
or,

In

they are in a p o s i t i o n to be l o c a t i o n leaders

in a n o t h e r type of termino log y,

to form the n ucleus of

a d e v e l o p m e n t pole or gro w t h center.
We e m p h a s i z e d then that the high l y a r t i c u l a t e d ma rke t
o r g a n i z a t i o n w h i c h these firms have,
mark e t

share w h i c h

they have to rea ct

the large and incre asi ng

in a g g r e g a t e th ey control,

and the p o w e r

if this share is threatened,

p l a c e these

firms in a p r i v i l e g e d p o s i t i o n to initia te importa nt m o d i f i ­
cations

in the st ru ctur e of the geog r a p h i c d i s t r i b u t i o n of

economic activities.

All this sugges ts

location is the domi nant
differentials.

that th eir cho ice of

fac t o r acco u n t i n g for area gr owth

145
The empir i c a l part o f the r e s e a r c h was d e s i g n e d to
test,

on a sm all scale,

if the

largest

this role b e t w e e n 1960 an d 1970.

firms a c t u a l l y p l a y e d

Th e states of M i c h i g a n and

C a l i f o r n i a w e r e s e l e c t e d for a case analysis,

the first

b eca use it is the s tate in w h i c h the r e s e a r c h was pursued,
the se cond b e c a u s e of its h i g h gro w t h rate.

T h e two states

we r e d i v i d e d in 45 m u l t i - c o u n t y areas c a l l e d B a s i c T r a d i n g
Areas,

w h i c h a p p r o x i m a t e the c o n c e p t of fun c t i o n a l

e c o nomic

areas w h i c h in turn are b e l i e v e d to be the m o s t a p p r o p r i a t e
unit of o b s e r v a t i o n w i t h i n w h i c h to e x a m i n e the
a firm ma y ha ve on its su rro undin gs.
or i e n t e d the BTAs

incl u d i n g one,

We c l a s s i f i e d as u r b a n

or m o r e

than one,

All others w e r e cl a s s e d as rural oriented.
inclu ded are the F ortune M a g a z i n e
corporat ions

plus

in flu ence

SMSAs.

The firms

200 large st

in dustrial

the thir ty of the next t h ree h undred

largest w h ich ha d th eir h e a d q u a r t e r s
Ca l i f o r n i a in 1970.

in eit h e r M i c h i g a n or

T h e i r e m p l o y m e n t figure s w e r e

taken

from the Sales M a n a g e m e n t D i r e c t o r y of Key Plants.
A d e s c r i p t i v e analy s i s d e m o n s t r a t e d ’ that the larg est
u r b a n areas are these firms'

p r e f e r r e d are a of location.

Arou n d 96 p e r c e n t of their emplo y e e s w e r e

found in u r b a n BTAs

and m o r e than 3 out of 4 in the t hree lar gest of these.
Betw een

1960 and 1970,

ployees m o s t l y

th ey i n c r e a s e d th eir n u m b e r of e m ­

in the ring c o u nt ies of these three areas.

The c h a n g e in total m a n u f a c t u r i n g e mpl oy ment ,

total e m p l o y ­

ment and p o p u l a t i o n was o b s e r v e d to fo llo w that p a t t e r n
very closely.

P r o c e e d i n g then to a r e g r e s s i o n anal ysis,

w e defined,

as a m e a s u r e of the grow t h d i f f e r e n t i a l s we w i s h e d to explain,
a v a r i a b l e n amed c o m p a r a t i v e gain in emp l o y m e n t a d j u s t e d for
industrial

structure.

This variable

isola tes

the g a i n in

empl o y m e n t of a s p e c i f i c area over the a ve rage of all areas
resulting
to ma ke

fro m c e r t a i n factor s at w o r k in the local e c o n o m y

it grow faster,

thus

e x c l u d i n g the g a i n w h i c h m ight

resul t f r o m its s p e c i a l i z a t i o n in fast g r o w i n g industries.
We f o r m u l a t e d and e s t i m a t e d b y the m e t h o d of o r d i n a r y least
squares

a f u n c t i o n in w h i c h th e d e t e r m i n a n t s of the c o m p a r a ­

tive ga in w e r e a s s u m e d to be:

a v a r i a b l e r e f l e c t i n g the

choi c e of lo ca tion s of the l o c a t i o n l e a d e r s - - t h e c h a n g e
e m p l o y m e n t in the area of the 230 l a rge firms
1960 and 1970,

in

included between

a set of v a r i a b l e s r e f l e c t i n g the a t t r a c t i v e ­

ness of an area for in dust ries or the efforts of the area
to i n c r e a s e it and a scale var iable.
s u p p o r t e d our hypothesis.

The res ults

M o r e than 90 p e r c e n t of the

v a r i a b i l i t y of the d ependent v a r i a b l e was
model,

strongly

e x p l a i n e d by the

the c o e f f i c i e n t o f the v a r i a b l e r e f l e c t i n g

in the ac tivities of the leaders

the ch ange

in the area wa s h i g h l y

si g n i f i c a n t and h a d by far the l a r g e s t b e t a weig h t.

Most

of the o ther v a r i a b l e s w e r e no t s i g n i f i c a n t at the 95 p e r c e n t
level of c o n f i d e n c e and they e x p l a i n e d a v e r y m i n o r p r o p o r ­
tion of the c o m p a r a t i v e gain.

M o r e o v e r the c o r r e l a t i o n was

low b e t w e e n either the c o m p a r a t i v e g a i n or the larg es t
firms v a r i a b l e and the v a r i a b l e s r e l a t e d to the a t t r a c t i v e ­
ness of areas.

Thus

it can n o t be a r g u e d that the larg est

147
firms'

c h o i c e of l o c a t i o n is a s s o c i a t e d w i t h this a t t r a c ­

tiveness.
We e s t i m a t e d a few m o r e
w o r t h w h i l e additions.

In one,

functions.

we m o d i f i e d the unit of o b ­

s e r v a t i o n for our th ree lar gest area s
gate w h a t was b e l i e v e d
entities

in o rder to d i s a g g r e ­

to be an a g g r e g a t i o n o f su ch d i f f e r e n t

(the centr al and ring counties of those BTAs w h i c h

in clu ded the lar ges t SMSAs)

that we m ight

the v a r i a b i l i t y w e w i s h e d to explain.
were very
stant ial

Two of t h e m we re

similar.
i ncr ea se

first function,

lose a pa rt of

Th e r esults o b t a i n e d

This r e g r e s s i o n c o n t r i b u t e d to a s u b ­
in our c o n f i d e n c e in the r esul ts of the

si nce it e l i m i n a t e d the e a r l i e r multi-

c o l l i n e a r i t y p r o b l e m i n v o l v e d in the hig h c o r r e l a t i o n c o ­
effic i ent b e t w e e n the scale a nd the large
while producing

the same result.

In anothe r function,
adjusted

for in dustrial

The results,

firms v a r i a b l e s

we r e p l a c e d the c o m p a r a t i v e gain

stru c t u r e by an u n a d j u s t e d gain.

particularly with

the m o d i f i e d BTAs as u n i t of

o b s e r v a t i o n wer e v e r y simil ar to those p r e v i o u s l y reported.
This sugges ts

that it is u n n e c e s s a r y to m a k e the a d j u s t m e n t

for industrial s t r u c t u r e w h i c h

involves

a su b s t a n t i a l

am ount

of a d d i t i o n a l data c o l l e c t i o n and proc essing.
The func t i o n s e s t i m a t e d w i t h the cou n t y as a unit of
o b s e r v a t i o n and th ose with the e x p o n e n t i a l
any ne w information.

fo rm di d not add

148
B e c a u s e this analys is

is only a case analy sis

in w h i c h

we had too few large and i n t e r m e d i a t e s ized areas and be c a u s e
a hypothesis

is n ot p r o v e n but o n l y s u p p o r t e d by a s t a t i s c a l

a naly sis we r e f r a i n
the h y p o t h e s i s

from infe rring too c a t e g o r i c a l l y that

form u l a t e d

is valid.

w e i g h t o f the e v i d e n c e su pports

W e c o n c l u d e d that the

the c o n c l u s i o n that the

largest m a n u f a c t u r i n g c o r p o r a t i o n s

ar e the most

i mportant

fa ctor e x p l a i n i n g w h y areas g r o w at w i d e l y d i f f e r e n t rates.
A s s u m i n g this c o n c l u s i o n
pol i c y implic a t i o n s

is corr ect, we shall e xamine the

of this ana lys is

and put f orward a

re comm end ati on.
A Poli cy R e c o m m e n d a t i o n
In the c o n c l u d i n g r e m a r k of a p aper lo oking at the
impact of ch anging
developm ent ,

industrial

o r g a n i z a t i o n on c o m m u n i t y

W i l l a r d M u e l l e r sugg est s

that:

. .students of rural and c o m m u n i t y d e v e l o p ­
ment are well a d v i s e d to look at the b r o a d e r
e c o n o m i c en v i r o n m e n t w i t h i n w h i c h they are
pl ying th eir trade.
O t h e r w i s e they not only
m ay miss the forest for the trees; but may
go hu n t i n g in the w r o n g fores t" [Mueller, 1972].
In this r e s e a r c h we have f o l l o w e d his advice.
a tte n t i o n fo c u s e d on one of the mo st p o w e r f u l
w h ere p r e s e n t

in this b r o a d e c o nomic

rural areas:

the

the hypo t h e s i s

largest firms.

Our

forces e v e r y ­

e n v i r o n m e n t exce p t

Th e analy sis

in

s upp o r t e d

that the choice of l o c a t i o n of the larg e

firms is the d o m i n a n t factor e x p l a i n i n g w h y some areas grow

149
and others do not.

It also suppo r t e d the v i e w that rural

d e v e l o p m e n t efforts

focusing on att empt s

attractiveness

of rural areas

achieve the task.

It is,

in the w ron g forest.

th emselves

to i n c rease the
are w e a k means

in M u e l l e r ' s words,

The right forest

to

like h u n t i n g

in w h i c h to hun t

is

the w o r l d of the largest m a n u f a c t u r i n g c o r p o rations.
What kind of h u n t i n g would,
the task of e n h a n c i n g
question.

the gro w t h of rural areas

ach i e v e

is the

Let us p r o c e e d to examine the i m p l i c a t i o n s of

our analysis
w e a k means

in this forest,

as

to,

first, w h a t poli c y

of a c h i e v i n g the task,

tools a p p e a r to be

s h i fting g r a d u a l l y to

means w h i c h the au tho r be lieves to be the m o s t effective.
A c lear im p l i c a t i o n of our analy sis

is that a p r o g r a m

d e s i g n e d to have all the a g g l o m e r a t i o n d i s e c o n o m i e s
ated w i t h la rge u r b a n centers

associ­

i n t e r n a l i z e d or r e f l e c t e d

in

some w a y in the costs of the firms l o c a t e d ther e w o u l d be
a w e a k means

to ge nerate an imp ortant d e c o n c e n t r a t i o n m o v e ­

ment in favor of rural
of our arg umen ts

in Ch a p t e r

sis is that the most
tion trend,

areas.

contained

im portant d e t e r m i n a n t of the c o n c e n t r a ­

involved in the

are in a p o s i t i o n to absorb
i n t e r n a l i z a t i o n of external

d i s e c o n o m i e s w i t h o u t c h a nging t h eir location.
shift these costs
a d m inister prices,

in one

II and the results o f o ur a n a l y ­

the larges t firms,

the extra costs

The reason,

T h e y can

to the consu m e r s t h r o u g h t heir p o w e r to
resume l o c ating as they used to and lead

the path tow ard furthe r concentrat ion .

150
The same r easoning can be ap p l i e d to a poli c y that
w o u l d impose a tax on the sale of p r o ducts m a n u f a c t u r e d in
the loc ations c o n s i d e r e d as ove rly conc ent rat ed.
of the tax c o uld be s hifted to others

and hav e no impact on

the choice of location of the lo catio n leaders.
tive,

a tax w o u l d have to be

The b u r d e n

To be e f f e c ­

imposed on the net profi ts

r e a l i z e d by these firms.
In the last point w e r e f e r r e d to the p o wer of a d m i n ­
istering prices w h i c h the larg est firms h a v e and can use to
elim inate or re duc e the e f f e c t i v e n e s s
to a c h i e v e an objective.

of one p o s s i b l e means

We ha ve indic a t e d

in the r e s earch

that the l argest firms have far r e a ch ing powers over their
economi c en v i r o n m e n t generally.

It is like ly that w e coul d

refer to any one of their pow e r s to sugg est that they coul d
get ar oun d m o s t forms
mi ght use

inc en tive s pub l i c a u t h o rities

in a t t e m p t i n g to m o d i f y their behavior.

not attemp t

to rev i e w w h a t

tives m i ght be,
actions

of m a r k e t

W e will

these other forms of mark e t

incen­

but turn immediately to exam in e o t her p o s s i b l e

o u t s i d e the f r a m e w o r k o f the mark e t

system.

In that

we are s t r ong ly suppo r t e d by one o f Galbraith's remarks:
"In trying to place all p r o blems w i t h i n the f r a m e ­
w o r k of the m a r k e t and all b e h a v i o r s u b o r d i n a t e d
to mark e t command, ec onomists do, we have s u f f i ­
c iently seen, render great serv i ce to the p l a n ­
ning s y s tem--to the d i s g u i s e of the p o w e r that
it in fact wields.
But this is soc ia l l y a
d ubious fu nct i o n and n o t one that w e n e e d applaud"
[Galbraith, 1973, p. 323].

151
Let us e x a m i n e nex t one p o s s i b l e means,
one of our p r e v i o u s arguments,

s u g g e s t e d by

to enh a n c e rural g r o w t h w i t h ­

out m o d i f y i n g the geo g r a p h i c d i s t r i b u t i o n of the e m p l o y m e n t
of the largest

firms.

We i n d i c a t e d that an impo r t a n t c h a r a c ­

te r istic of the large firms w h i c h places
p o s i t i o n to act as l o c a t i o n lead ers

t h e m in a p r i v i l e g e d

is th e la rge and

ing sh are of the m a j o r markets w h i c h

increas­

in a g g r e g a t e they

control and the c om m a n d they h a v e ov er a s u b s t a n t i a l part of
the co untry's
if,

total new investment.

for a g iven numb e r of years,

the re p l a c e m e n t of w o r n - o u t
1,000 largest

It m a y be a r g u e d that

furthe r gro w t h and even

fa ciliti es of the 200 or 500 or

firms w e r e p r o h i b i t e d

(or a 100 p e r c e n t tax

imposed on the net profits of those firms wh o do grow)
stantial

sub­

inve s t m e n t and ma r k e t pote n t i a l s w o u l d be o p e n e d

to o t her people, m a n y of w h i c h c ou ld be local b u s i n e s s m e n
in rural

areas.

Th e resu lt m i g h t be an im portant

in their share of the coun try 's

total em ployment.

a p o s s i b l e but u n c e r t a i n outcome.

in creas e
That is

The q u e s t i o n is w h e r e

will gr owth occu r if it does not o c cur th r o u g h the l argest
firms.

A nu m b e r of small and m e d i u m - s i z e d firms m a y ex pand

in rural areas.

But it is likely that m o s t of the m w i l l

choose to loca te or ex pand the ir fa cilities
d e v e l o p e d areas.

This follows

in a l r e a d y

our li ne of a r g u m e n t s u g g e s t ­

ing that a firm has to be large to s u c c e e d in i n i t i a t i n g
the gr owth of r e l a t i v e l y u n s e t t l e d areas.
oped areas w o u l d be left unch ange d,
w o u l d turn out to be a w e a k one.

The least d e v e l ­

and the ma ns p r o p o s e d

152
A n almost c e r t a i n l y s t r o n g e r m e ans w o u l d be to p r e v e n t
the g r o w t h o f the largest firms only in a n u m b e r of d e s i g ­
n a ted areas.

T h e s e m ight be the BTAs h av i n g a l r e a d y

or 500,000 and mo r e

inhabitants.

It w o u l d

200,000

leave the p o s s i ­

b il i t y to the large st firms, w h o are in a p r i v i l e g e d p o s i t i o n
to do it,

to loc ate in small and rural areas.

It m a y be

o b s e r v e d h e r e that the past l o c a t i o n trend of th e largest
firms sugg es ts

that they are u n w i l l i n g to do it.

the c o m m i t m e n t to grow t h th ese firms have,
that w i t h o u t

the large BTA a l t e r n a t i v e ,

their l o c a t i o n p a t t e r n and

But,

giv en

it is v e r y likely

they w o u l d ch ange

initiate an impo rtant c h a n g e in

the g e o g r a p h i c d i s t r i b u t i o n of the c ountry*s to tal employment.
B e c a u s e of the p o s s i b i l i t y that large firms m i g h t
choose to stop growing rather than locate elsewhere,

we

should like to pr o p o s e a m eans w e b e l i e v e to b e ev en s t r o n g e r
and m o r e specific.

Let us assu me that,

of the contiguous U n i t e d States, we
them

a mong th e 489 BTAs

id entify a n u m b e r of

(let us say 200) w h i c h are in need o f growth.

Within

these areas we iden tify a p oin t w h e r e a g r o w t h c e n t e r is to
be c r e a t e d and w h e r e the largest firms w i l l have to be found
w i t h em plo yees

in a given num b e r of years.

T h e n the largest

firms w o u l d be faced w i t h a gr adient of inc ome tax relat ed
to the p e r c e n t a g e of their e m p loyment

fo und in the d e s i g n a t e d

point s and areas in a g iven numb e r of years.

Fo r example,

assume that tod ay General Mot ors has

zero p e r c e n t of its

empl o y m e n t in the d e s i g n a t e d areas.

If in five years,

let

153
us say,

this p e r c e n t a g e

is still

zero percent,

its annual

income tax wi ll be 100 pe r c e n t of net profit s b e f o r e allo wance
for d e p r e c i a t i o n . 33

If it has

in the d e s i g n a t e d areas,
and so on.

Of course,

5 pe r c e n t of its emplo yme nt

the tax rate m i g h t be 75 p ercent

the d e s i g n a t i o n o f areas

in need of

growt h m ight c h a n g e over time as well as the g r a d i e n t of tax
rate.

On e m a y also be m o r e or less c o n s t r a i n i n g d e p e n d i n g

on the cu rrent

state of the ec onomic cycle.

W h e n the GN P is

expan d ing we m i ght w i s h to p r o c e e d fas ter than w h e n it is
stagnant.

O t h e r w i s e w e w o u l d cre ate a cos t l y u n u s e d p r o ­

duc t i v e c a p a c i t y in the l ar gest areas.
Let us propos e

finally a use for the funds w h i c h w o u l d

be ra is ed w i t h the high tax ra te on the firms u n w i l l i n g to
relocate.

T hese funds m i g h t b e us ed to f i n a n c e the

structural

facilit ies a c c o m p a n y i n g

d e s i g n a t e d gr owth centers.
ment subs idies

the d e v e l o p m e n t

infra­
of the

It m i ght also be u s e d as i n v e s t ­

for groups of firms w i l l i n g to i n i tiate the

d e v e l o p m e n t of a gr owth ce nter in the d e s i g n a t e d areas.
The a bove p r o posal c o n t a i n s a m u c h - s t r o n g e r m e a ns
those used thus

far to alter the s e t t l e m e n t pattern.

have n o w to address

than

We

our selves b r i e f l y to some o f the o b j e c ­

tions peop l e m ight have to this proposal.

77

Note that this is a seve r e treatment.
It w o u l d
dry up the sources of a firm's e c o nomic pow e r s an d c onde mn
the la rge firm to d i s a p p e a r if it fai l e d to cooperate.

154

The first one is the o b j e c t i o n of p e o p l e c o n c e r n e d
with the p r o b l e m of a b s e n t e e o w n e r s h i p w h i c h c ould arise in
this proposal.

G e o ffrey Faux sugge sts

rar ely any emp loyment b e n efits
small c o m m u n i t y "

[Faux,

refer e n c e to studies
jobs.

that "t her e are

from a b s e n t e e o w n e r s h i p in a

1972].

He supports

related to the effects

S i m i l a r l y W i l l a r d M u e l l e r e m p hasizes

this v i e w in
of me r g e r s

the n e g a t i v e

emp lo yment impact of the a c q u i s i t i o n of a local
large c o r p o r a t i o n

[Mueller,

1972].

on

firm by a

We are not o v e r l y c o n ­

cern e d w i t h these remarks

since our p r o posal sh ou l d no t lead

to,

in such a w a y that it prevents,

an d m i g h t be d e s i g n e d

any a c c e l e r a t i o n of the m e r g e r movement.
The authors quo t e d e mphasize ho w e v e r th at the a b s e n t e e
owner m a y be far less c o n c e r n e d w i t h the q u a l i t y of c o m m u n i t y
life,

the p r o t e c t i o n of the enviro nme nt

q u i c k e r to lay off w orkers
turn than is the local

that he may be

at the sl igh test

firm w h o s e m a n a g e m e n t

sign of a d o w n ­
feels some

r e s p o n s i b i l i t y in the community.
These are more serious

difficulties-.

It ma y be a real

p rob lem for a comm u n i t y to have a m a jo r p o r t i o n of its
economic base c o n t r o l l e d by outsiders.

One ma y w o n d e r h o w ­

ever if this is a mo re serious p r o b l e m than to have no
econ omi c ba se at all.

We can argue also that the cities

po l l u t e d by a b s entee owners w e r e p o l l u t e d long b e f o r e the
prese nt conce rn about p o l l u t i o n had d e v e l o p e d and b e f o r e
our soc i e t y had ta ken me ans

to control pollution.

There

155
should be ways
firms

to dire ct the c o n t r i b u t i o n of the larg est

to incre ase the economic base of sm all cities and

rural areas w i t h o u t d e s t r o y i n g them.
The sec o n d o b j e c t i o n is that of peo p l e w h o w i l l argue
that the p o l i c y move

invol ve d in the above p r o posal

an easy one for a g o v ernment

to make,

is not

that it ove rrides the

concept of fre edo m of ch oic e w i t h respect to l o c a t i o n which,
in a d e m o c r a t i c society,

is gene r a l l y a c c e p t e d or,

in a word,

that we p r o p o s e to repla ce the pri v a t e d e c i s i o n m a k i n g
syst em w i t h pub l i c p l a n n i n g
p r o b l e m d i s c u s s e d here).

(at least w i t h r espect to the

It is c ertainly true that the

poli c y p r o p o s e d is not an easy one to acco mplish,

bu t that

the task of p r o m o t i n g a more b a l a n c e d p o p u l a t i o n s e ttlement
and eco nomic ac tivit ies d i s t r i b u t i o n p a t ter ns
not any easier.
pol icy suggests
cates

is p r o b a b l y

Past exp e r i e n c e w i t h rural d e v e l o p m e n t
that.

On the other hand,

our analysis

indi­

that the largest firms are c u r r e n t l y the m a i n d e t e r ­

min ant of these se tt l e m e n t trends

and that th ese firms

cont rol more than they are c o n t r o l l e d by the forces of the
market.

We do not see how the task can be a c h ie ved if one

does not act at the level we proposed.
Th e q u e s t i o n can be rai s e d of w h e t h e r we wan t to o v e r ­
ride the f reedom of ch oic e of the largest c o r p o r a t i o n s w i t h
resp ect to lo catio n and to r e p l a c e the mar k e t w i t h publ i c
p l a n n i n g w i t h resp ect to the p r o b l e m discussed.
is cl e a r l y yes.

The answer

We do wa nt to ov errid e the f r e e d o m of choice

156
of the largest corpor a t i o n s an d we do have reasons
some form of p l a n n i n g on them.
begi nning of this

Y ou recall

that at the very-

thesis we quo t e d T e f e r t i l l e r as saying that

a rural de v e l o p m e n t pol i c y has to address
basic que stions

to im po se

of

itself to the

w h e r e p e o p l e are g o ing to live and w o r k

in the future and u nder what co nditions.

Our analy sis

suggests that the largest c o r p o r a t i o n s hav e a n s w e r e d this
question,

not in wo rds but

ourse lve s

to it.

in facts,

long b e f o r e we a d d r e s s e d

We argu e d in C h a p t e r I that the answer

they provided is not s o c ia lly acceptable.
is w h o s e f reedom of ch oi ce sho u l d count?

The q u e s t i o n then
That of the t e c h ­

nos t r u c t u r e of two h u n d r e d c o r p o r a t i o n s or that of m i l l i o n s
of people who,

as Ga ll up Polls reveal,

live w h e r e they do no t w i s h

(see

answer to this q u e s t i o n is clear:
milli ons

are c o n s t r a i n e d to

footnote 7).

For us the

the f r e e d o m of cho ice of

of pe op le sh ould o v e r r i d e the f reedom of cho i c e of

200 corporations.

The p r o b l e m is that we ha ve too long

been u s e d to thinkin g that the pu blic and p r i v a t e
coincide

in a mark e t d o m i n a t e d solution.-

we have shown ev ide nce that
does not.

This

interest

We b e l i e v e that

in the case s tudied here it

is wh y we w a n t to re p l a c e the mark e t wi th

p l a n n i n g or more e xa ctly to re p l a c e p r i v a t e p l a n n i n g w i t h
pu blic planning.

It is b e c a u s e in this case,

true in many others,

as is p r o b a b l y

the m a r k e t does no t w o r k for the

b enefit of the majority.

157
Here again we are s t r o n g l y s u p p o r t e d by Galbraith.
He suggests

that the clear est c o n c l u s i o n of his mo st recent

bo ok is that:
"Left to themselves, e c o n o m i c forces do not
w o r k out for the best exc ept per hap s for
the p owerful" [Galbraith, 1973, p. xiii] .
This
what

is w h y when he turns

to do,

to exam i ne the q u e s t i o n of

he states that:

"There wi ll ha ve to be a publ i c p l a nning
authority. . . .The state, in short, will
take steps to effect the c o o r d i n a t i o n of
w h i c h the p l a n n i n g sys t e m is incapable.
It will impose overa ll pl anning on the
p l a n n i n g system.
This is the next and
w h o l l y c e r t a i n step in econom ic d e v e l o p ­
ment- -one that is so l i d l y suppo r t e d by the
logic of the p l a nning sys tem " [Galbraith,
1973, p . , 318].

Sugge sti ons

for F urther Research

W h e n dra wi ng the in ferences
analysis,

from the results of our

we in dic ated that r e p e a t e d tests of an hypot hes is

are n e e d e d bef o r e one can be c o m p l e t e l y co nf ident
validity.

We sugg e s t e d that it w o u l d be useful

our test on a br o a d e r basis,

one that w o u l d

large and i n t e r m e d i a t e - s i z e d areas,
comments are in order.
test,

in its

to repeat

include m o r e

A few m e t h o d o l o g i c a l

We b e l i e v e that,

in r epeating our

time and m oney w o u l d be s aved w i t h o u t

imp ortant

losses of in f o r m a t i o n if the analy sis was l imited to the
estimation of one function,
unit of observation,

u s i n g the m o d i f i e d B T A as the

the u n a d j u s t e d co m p a r a t i v e g a i n as the

158
de pendent v a r i a b l e an d the Cou n t y B u s iness

Patterns

total

employment data.
We still t hink that the B asic T r a d i n g A r e a is c o n ­
c ept u a l l y the m o s t a p p r o p r i a t e area d e l i n e a t i o n w i t h i n whic h
to examine the r e l a t ionships
tional area.

s tudied b e c a u s e it is a f u n c ­

But one of the t rade off's

involv ed in this

area d e l i n e a t i o n w h i c h we w e r e un a w a r e of b e f o r e w e e s timated
the fu nction is the m u l t i c o l l i n e a r i t y p r o b l e m f aced wi th
it's use.

The m o d i f i c a t i o n of only the largest BTAs e nabled

us to get ar oun d this p r o b l e m w h i l e k e eping a functio nal
area for all our o t h e r obs erv atio ns.

This causes us

to

sugge st that all areas be d e f i n e d as m o d i f i e d BTAs in
e s tablishing the unit of o b s e r v a t i o n w i t h w h i c h to repeat
the test.
In our analysis,

we w e r e u n a b l e to sh o w st ro ng evide nce

for the importance of m e a s u r i n g gro wth d i f f e r e n t i a l s w i t h
a c o m p a rative gain a d j u s t e d for
the adj u stment involves
tion and ma nip ulat ion,

indu str ial structure.

an im portant

Since

am ou nt of dat a c o l l e c ­

it p r o b a b l y sho u l d be omitted.

County Business P a t t e r n total emp l o y m e n t data sho uld
be u s e d inasmuch as w e have s u g g e s t e d use o f the m o d i f i e d
BTAs

as the unit of ob serv ati on.

In th ose areas w h i c h are

m o d i f i e d an d the refore no l on g e r func t i o n a l areas,

it is

ce rtainly m o r e a p p r o p r i a t e to use e s t a blishment rather
than residential e m p l oyment data.
To foll o w the logic of our ar gument

that an hypot hes is

159
sh ould be s ubm i t t e d to several tests, we do not be l i e v e
that any o f the
dropped,

independent vari a b l e s w e used sh ould be

even those w h i c h were not s i g n i f i c a n t

the functions

estimated.

in any of

We w o u l d even r e c o m m e n d that one

add a few variables nam e l y those spelle d out in footno te
18 on page

67 rel at ed to the p r e s e n c e o f su ch things as

the de v e l o p m e n t of m a j or hi ghways

or an ed u c a t i o n a l or

m i l i t a r y institution.
T he most imp ortant area of fur ther r e s e a r c h s uggested
by our analysis
we

is re l a t e d to the b a sic q u e s t i o n w i t h w h i c h

intro duc ed the pr o b l e m e x a m i n e d

in this research:

Where

are p e o p l e going to live and w o r k in the future and u n d e r
what c ondit ions?

Th e task we set to our selves was not to

answer this q u e s t i o n but to ident ify in the recent s e t t l e ­
ment trends a so lid j u s t i f i c a t i o n for the s o c i a l l y accept ed
bel i e f that more peo p l e sh ould be able to w o r k and live in
rural areas and identify ef fec tive m eans
s peci fic objective.
the hyp othesis

This we did.

to achiev e this

H o w e v e r the natu r e of

i n vest igated embodied the b e l i e f that rural

problem s cannot be sep a r a t e d

from u r ban p r o blems

and coul d

not be solved in isolati on from the b r o a d e r e c o n o m i c e n v i r ­
onment of w hich rural areas

are part.

The h y p o t h e s i s was

s upp orted by the analysis.

We have sh own ev iden ce that

the largest m a n u f a c t u r i n g c o r p o r a t i o n s have
the b r oad quest i o n we asked.

in fact a n s w e r e d

The means we ide n t i f i e d to

achieve the limited o b j e c t i v e m i ght be used, w e believe,

160
by the publ i c a u t h o r i t y to w h o m this r e s p o n s i b i l i t y belong s,
to r eshape the total pi c t u r e of the g e o g r a p h i c d i s t r i b u t i o n
of p o p u l a t i o n and e c o n o m i c act ivit ies .

Mo re i n f o r m a t i o n

than we ha d is n e c e s s a r y to ac h i e v e this b r o a d e r objective.
As soon as we reco g n i z e that

the p r i v a t e p l a n n i n g p ower of

a few does not w o r k for the be st of all and w a n t to s u b s t i ­
tute a pub l i c p l a nning p o wer
it toward oth er goals,

for the p r i v a t e one and manage

w e face a toug h p r o b l e m as Galb r a i t h

c learly states:
"For h e r e will be e n c o u n t e r e d the m o s t d i f ­
ficult p r o blems of the pub l i c cognizance.
Th at wi ll be to have p l a n n i n g that reflects
not the p l a nning but the p u b l i c p u r p o s e s "
[Galbraith, 1973, p. 319].
Our analy si s

sugges ts

that part of the incre a s e d i n f o r ­

m at i o n that will be n e e d e d relates
our Fig ure

2 w h i c h gives

to the q u a n t i f i c a t i o n of

only the ge neral sh ape of the curves

r e l ating the private and social costs
services

to the size of cities

of p r o d u c i n g goods and

(see pa ge 47).

If we want

to dire ct the c o n t r i b u t i o n of the lar gest firms

tow ard the

de v e l o p m e n t of an o p t i m u m p a t t e r n of city sizes,
have

to know more p r e c i s e l y o v e r what

this o p t i m u m ma y be found.
be de f i n e d only
and services.

in terms

we will

range of city sizes

Note that the o p t i m u m m a y not

of the costs of p r o d u c i n g goods

It ma y includ e the variou s

peop le call the qu a l i t y of life.

And,

aspects

of what

on this point,

we

161
note that re se arch sho u l d be d i r e c t e d toward
tion of means

the i d e n t i f i c a ­

to m ake the la rge a b s e n t e e o w ner m o r e c o n c e r n e d

about the qu a l i t y of c o m m u n i t y life.
We of f e r e d a speci fic poli c y p r o posal b a s e d on our
analysis.
their

If others p e r h a p s d i f f e r

in any m a j o r w a y

in

i n t e r p r e t a t i o n of the a nal ys is p r e s e n t e d here,

it

w ould be ap p r o p r i a t e

for them to

identi fy an d i n v e s t i g a t e

al t e r n a t i v e p o l i c y options.
Let us c o n c l u d e final ly that r e s e a r c h efforts
n e e d e d with respe ct to the i n s t i tu tional

are

f r amework w i t h i n

wh ich the type of p l a n n i n g p r o p o s e d he re will be implemented.
This

is n e c e s s a r y

if we are to achiev e

or the b roader pub l i c objectives.

either the limited

G a l b r a i t h suggests

"the c r e a t i o n of the p l a n n i n g mac hi nery ,

w hich the pr e s e n t

st ructure of the economy makes

imperative,

is the next

major

[Galbraith,

1973,

task in econo m i c de s i g n "

that

p.

319].

APPENDIX

Appendix Table 1. Selected Variables for Counties and Basic Trading Areas.

Census
B^iloyttent
1970
1960

Census
Gxparative
Gain

Census
Employment
1970
1959

Census
Comparative
Gain

Adrian

30,604

26,234

-54

92,824

17,443

-1,012

Alcona
Alpena
Mxitaoraicy
Presque Isle
Alpena

1,320
9,493
1,412
3,458
16,183

1,895
9,185
1,345
4,151
16,576

-329
-1,267
-104
-929
-2,629

834
6,827
633
1,845
10,139

337
5,454
276
1,557
7,624

373
-626
256
-283
-280

Barry
Brandi
Calhoun
Battle Creek

13,748
13,254
55,338
82,340

11,367
12,538
51,063
74,968

711
-1,266
-5,395
-5,951

4,334
6,683
44,827
55,344

3,908
5,373
36,467
45,748

-1,008
-662
-5,023
-6,693

Arenac
Bay
Crawford
Gladwin
Iosco
Midland
Qgeaaw
Oscoda
ftosctnaon
Bay City-Midland

3,503
40,908
2,908
4,110
5,579
22,468
3,272
1,253
2,691
85,870

3,193
36,416
-1,632
3,319
4,382
16,297
2,772
1,086
2,231
71,333

-116
•2,004
95
436
350
3,715
156
25
5
2,664

1,368
26,581
1,490
916
3,229
22,570
1,412
401
1,173
59,140

856
20,628
798
544
1,983
15,627
934
305
627
42,302

Benton Harbor
St, Joe

63,303

56,355

-1,787

54,145

36,115

21,127
13,200
223,429
135,915
344,420
240,861
41,924
32,420
97,591
65,532
998,204
953,959
1,731,595 1,439,887

5,213
62,166
44,306
4,044
10,293
-153,297
-27,274

Livingston
fecoob
Oakland
Afcnroe
Washtenaw
Wayne
Detroit

Largest Firms
Temper­ Wage Land
Govern­ Edu­
Employment
ment cation ature
Value
1970
1960 Change
5,600

0
0
0
0
0
900

0

7,900

-2,300 462

43.3

49.8

2.81 320

30

0
0
0
0
0
1,000
0

0
0
0
0

32.2
35.1
32.7
31.2
33.5

42.1
42.1
43.5
42.1
42.1

..139
2.90 118
2.00 104
1.53 98
2.80 113

150

41.5
37.9
43.7
42.4

49.1
49.3
48.8
48.8

2.55 180
2.46 212
3.04 207
2.90 201

42

31.8
35.7
36.9
33.0
46.2
53.7
32.3
34.1
42.0
40.1

43.5
48.6
43.5
45.0
43.5
48.4
43.5
43.5
43.5
43.6

2.11 178
2.91 397
1.78 96
2.55 123
2.10 161
2.76 215
1.66 118
1.18 76
2.01 183
2.76 216

43

-100
0
-1,200

370
546
537
-1,300 513

11,800
12,800

198
-1,617
399
172
518
1,208
135
-16
316
1,313

0
0
0
0
14,000
0
0
0

0
0
-1,200
0
0
0
0
0
0
11,400
2,600
0
0
0
0
0
0

21,800

20,400

549
421
444
465
481
669
472
479
581
1,400 499

4,776

11,200
0

9,700

1,500 494

39.3

50.1

2.64 474

11

0
0 462
9,500 574
49,400 39,900
61,600 43,900 17,700 593
1,700
1,700
0 426
31,400 20,800 10,600 488
223,100 257,800 -34,700 630
3,100 605
367,200 364,100

43.0
41.8
51.6
32.4
55.3
38.2
41.3

47.2
48.7
48.4
50.2
50.0
49.7
49.7

2.36
3.18
3.20
3.00
3.20
3.27
3.24

264
519
530
441
341
1069
437

0

500 495
0 629
500 522

39.3
31.8
37.7

42.4
41.4
42.4

2.51
2.29
2.50

69
61

-1,800 594
0 533
-1,800 588

40.0
35.6
39.6

49.5
47.5
47.5

3.43 347
2.27 249
3.40 289

0 412
1,600 439
-1,300 503
0 570
700 499
900 472
0 416

34.9
38.8
42.7
24.8
36.5
36.3
41.2

49.3
47.6
47.6
46.4
46.4
48.3
46.4

2.30
2.28
2.70
1.54
1.99
2.38

251
192
260
73
87
346

3.06

101

1,560
7,449
4,308
29,456
151,068
88,963
86,744
242,675
114,063
18,461
13,123
522
16,220
66,807
37,006
922,705
815,398 -191,944
1,409,165 1,072,866 -57,442

7,800

1,000
0
1,000

9,000

500

10,519
2,507
13,026

-939
-532
-1,471

6,903
1,114
8,017

5,671
1,206
6,877

-849
-535
-1,484

Genesee
Lapeer
Hint

159,476
17,090
176,566

132,406
13,303
145,914

-508
1,612
1,104

137,201
5,725
142,926

99,696
3,210
102,906

917
1,337
2,254

62,700

64,500

62,700

64,500

Allegan
Ionia
Kent
Lake
Osceola
Ottawa
Mecosta

23,978
15,333
156,359
1,625
5,044
47,514
9,289

19,923
13,695
132,239
1,490
4,644
34,583
6,756

10,535
7,379
141,488
592
3,060
29,960
3,761

6,496
6,646
99,687
223
2,092
20,835
2,360

1,792
-1,706
5,216
287

600
1,600
18,800

600

1,47?
535

1,400

500

1,690
-230
-3,264
-32
-79
6,745
1,132

576
753
508
452
D 638

10,600
11,500

11,279
2,319
13,598

Delta
Schoolcraft
Escanaba

Dis­
tance

200

0

0

500

0

0
20,100
0
0
700
0
0

0

68

195

0

Appendix Table 1. Continued

Census
Brploynent
1970
1960
M m tcalm
Grand Rapids
Hougjiton
Keweenaw
Hancock-HnuRhton
Dickinson
Iron
Florence fKis)
Iron Maintain

Census
Comparative
Gain

Census
Bnploynent
1960
19S9

Census
Comparative
Gain

13,827
273,021

12,598
225,928

*427
5,534

9,210
205,985

6,357
144,669

520
8,323

9,426
S28
9.9S4

10,241
615
10,856

*2,780
-152
-2,932

4,628
290
4.918

5,933
171
6,154

-3,551
57
-3,494

7,741
3,920
1,027
12,683

7,683
5,040
1,028
13,751

-1,371
-1,723
-143
-3,238

5,586
1,751
294
7,631

4,545
2,909
215
7,669

-627
-2,226
-2,853

6,447
3,369
2,070

-1,824
-27
731
2,582

3,477
3,651
784
7,912

4,529
2,165
1,693
8,387

-2,714
689
-1,530
-3,555

-202

0

Largest Finns
Employment
1970
1960
Change
4,600
27,700

0
0
0
0
0
0
0
0
0
0
0

1,800
23,000

0
0
0
500

0
0

500

0
0
0
0
0

Gagebic
cntonagan
Iron (Kis.)
Ironwood

11,886

7,296
3,145
2,503
12,944

Hillsdale
Jackscn
Jackson

13.725
52,209
65,934

12,276
45,798
58,074

-2,410
-2,611

6,509
39,439
45,943

4,004
29,130
33,134

1,036
-381
654

600
5,700
6,300

4,700
4,700

Kalamazoo
Van Buren
Kalamazoo

79,098
19,930
99,028

62,712
17,179
79,891

3,172
625
3,797

63,564
9,933
73,497

45,203
6,826
52,029

1,771
602
2,373

10,600

8,700

10,600

8,700

17,746
26,269
105,416
149,431

13,009
18,047
79,222
110,278

2,533
4,595
4,215
11,341

4,286
7,873
83,532
95.741

2,663
4,439
57,325
64,427

646
1,805
5,219
7,670

Alger
Baraga
Marquette
Kanjuette

2,590
2,264
19,386
24,240

2,677
1,862
15,845
20,384

-362
78
308
25

1,757
1,237
11,588
14,582

1,259
658
9,094

11,011

36
338
-844
-470

rtiscti
Miskegon
Newaygo
Oceana
Mrskejon

8,096
56,081
8,811
5,813
78,803

7,347
51,703
7,370
4,951
71,371

-297
-5,407
656
377
-4,672

4,734
46,506
3,717
1,407
56,364

3,630
37,636
3,051
1,165
45,482

•288
-4,942
-454
-186
-5,810

Owesso

22,829

IB,899

779

11,194

9,690

-2,052

Charlevoix
Oieboygan
Banet
Otsego
Petoskev

5,697
4.867
6,261
3,442
20,267

4,320
3,979
5,174
2,420
15,893

658
235
58
564
1,S14

3,322
2,789
4,763
2,350
13,224

2,628
1,398
2,768
1,035
7,823

270
878
987
935
2,530

Clinton
Eaton
Ingham
Lansing

0

600

1,200
26,600
23,400

0

27.DDD

0
0
D
0
500
0
0
14,800 15,400
0
0
0
0
0
0

500

0
0
0
0
0

15,400

0
0
0
0
0
0

Distance

2,800 465
4,700 480

40,0
40.3

47.6
47.6

2.62 159
2.65 203

0

0
0
0

366
527
377

33.4
20.4
32.5

40.9
40.9
40.9

1.91 67
1.70 253
1.83 69

250

-500 539
0 637
0 770
-500 593

41.1
39.8
37.2
40.3

42.0
42.0
42.0
42.0

1.95
2.81
1.75
2.28

96
61
78
79

200

589
624
702
617

39.4
31.4
35.0
36.7

41.6
41.6
41.6
41.6

1.94
1.84
1.31
1.84

57
51
41
so

105

600 445
513
1,600 499

45.6
41.1
42.0

48.7
48.7
48.7

2.38 190
2.91 205
2.83 197

35

1,900 485
0 533
1,900 496

47.8
37.6
45.4

49.3
49.4
49.3

2.78 236
2.20 275
2.68 280

56

370
483
642
1,400 581

39.6
44.9
53.2
50.1

47.6
47.6
47.6
47.6

2.88
2.20

256
234
3.39 300
3.28 262

500 478
0 693
0 441
500 470

31.6
33.6
42.4
40.2

42.6
42.6
42.6
42.6

1.78

0 404
-600 518
0 437
0 469
-600 493

40.3
36.3
34.4
34.6
36.4

500 489

0
0
0
0
1,000

100
0 1,200
26,500
100
500

500

14,800

Govern' EduTemper- Wage Land
men: cation ature
Value

0
0
0
0
0

537
432
497
493
489

0

1.69
1.78

SB
56
64
76

240

48.2
48.2
48.2
48.2
48.2

2.19
3.02
2.92
1.42
2.92

159
235
146
153
166

34

40.6

48.4

2.47 265

26

40.7
33.1
43.2
35.0
38.6

43.5
43.5
43.S
43.5
43.S

1.88 111
1.87 89
2.15 86

2.00

2.56
2.04

90
94

1B5

Appendix Table 1.

Continued.

Census
fefilojment
1970
1960
Huron
Sanilac
St. Clair
Port fkiron

10,821

Census
Gnparative
Gain

484
1,648
-997
1,135

-5
1,361

2,447
8,124
5,606
64,010
5,808
85,995

1,055
6,630
3.294
46,261
3,779
61,019

1,005
-939
1,103
771
642
2,582

8,388
1,944
2,946
13,278

-1,930
-520
-783
-3,201

3,105
584
1,106
4,745

3,769
549
940
5,258

-2,047
-166
-179
-2,392

3,198
2,547
10,173
1,307
2,862
6,443
2,073
6,284
34,887

468
-83
1,276

1,997
1,523
10,815
438
1,050
4,728
432
5,270
26,253

998
B18

416
514
3,500
334
3,443
16,035

633
405
2,597
-131
347
-56
-25
563
4,333

__
...
...

—
...

4,960
6,594
14,300

4,496
4,006
10,659

-1,186
1,118
-271

53
356

5,105
13,750
15,627
76,664
15,855
127,001

3,653
12,552
11,624
64,463
13,865
106,157

849
-602
1,340

Chippewa
Luce
Mackinac
Sault Ste. M

7,875
1,977
2,596
12,448

Antrim
Bentie
Grand Traverse
Kalkaska
Leelenau
Manistee
Missaukee
Wexford
Traverse City

4,084
2,846
13,820
1,402
3,512
6,945
2,246
6,534
41,389

Bakersfield

8,320
16,607
18,287

88

496

-221

-100

275
-421
14
-839
594

6,012

109,539

98,273

-540

62,047

43,072

3,168

Butte
Glen
Qiico-Orville

31,737
6,430
38,167

26,566
6,489
S3,D55

689
51
742

15,645
2,475
18,120

11,718
1,967
13,685

-374
-214
-588

DelHorte
Fkubolt
Eureka

4,909
33,563
38,470

6,045
36,215
42,260

-2,035
-8,815
-10,849

3,054
21,227
24,281

3,807
22,251
26,058

-2,150
-9,190
-11,340

El Centro

23,479

28,027

-5,064

11,856

10,034

-1,850

138,729
12,620
151,349

123,612

-746
-29
-775

81,880
4,718
86,598

61,369
3,935
65,304

-2,011
-661
-2,672

Fresno
Madera
Fresno

12,202

135,814

Largest Firas
Erploytnent
1970
1960 Change

0
0

1,000 -1,000
0
0
500
0 500
500
1,000 -500
700
0 700
0
0
0
700
0 700
21,300 18,500 2,800
500
0 500
23,200

0
0
0
0
0
0
500
0
0
7(10
0
0
1,200
500

0

500

0
0
0
0
0
1,000
1,000
0
0
0
0

18,500

4,700

0
0
0
0
0
0
0
0
0
0
0
0
0 500
0
0
0
0
0 700
0
0
0
0
0 1,200
0
0
700

0
0
0
0
0
800
800

0

0
0
0
0
0
200
200
0

700

-700

700

-700

0

0

Govern- EduTender- Wage Land
ment cation ature
Value

Distance

436
438
494
473

29.9
35.5
36.6
35.1

46.4
46.4
46.4
46.4

2.26 248
2.07 202
2.83 227
2.59 224

55

460
442
423
515
409
4B0

38.5
40.2
41.6
36.6
33.5
37.1

47.1
47.1
47.1
47.1
47.1
47.1

2.61
2.3/
2.40
3.19
2.17
3,01

32

567
513
518
548

39.8
30.2
36.2
37.3

40.6
40.6
40.6
40.6

2.40
1.49
1.71
2.08

535
606
469
551
391
478
534
485
489

38.8
39.4
43.1
36.4
40.6
37.0
30.7
36.1
39.0

45.6
45.6
45.6
45.6
45.6
46.9
45.6
45.6
45.6

2.00
1.76
2.28
1.83
1.40
2.25
2.18
2.31
2.18

107
160
274
77
174
128
95
73
13.5

160

530
427
565

37.3
35.5
42.7

42.4
49.8
49.8

2.05 64
2.29 2.06
2.15 219

ISO
24
45

892

42.0

65.1

2.95 261

721
938
755

45.3
44.7
45.2

61.1
61.1
61.1

2.64 401
2.86 310
2.68 357

863
827
832

38.6
42.1
41.6

52.3
52.3
52.3

2.85 301

2.85 130

212

917

33.8

72.6

2.49 703

95

828
877
833

40.8
32.6
40.0

63.0
62.3
63.0

2.46 572
2.57 381
2,47 522

87
311
193
337
345
289

66
83
57

66

2.86 122

270

164

3,689
3,445
18,833
25,967

10,281
10,930
35,039
56,250

fenaainee
Cass
St. Joseph

Census
Conparative
Gain

5,499
6,357
24,748
36,604

11,699
41,207
63,727

dare
Gratiot
Isabella
Saginaw
Tuscola
Saginaw

Census
Enplojrient
1970
1959

0
82

0

Appendix Table 1. Continued.

Census
Ehploynmt
1970
1960
Los Angeles
Orange
Los Angeles

Census
Cbcparative
Gain

2,826,565 2,373,691 -83,342
546,313
241,805 229,114
3,370,878 2,615,496 145,772
2,171
-972
1,199

Mariposa
Merced
Merced

2,059
31,162
33,221

1,987
25,377
27,364

Stanidaus
Ttnlume
ttodestn

65,232
7,428
72,660

Shasta
Teham.
Trinity
Bedding
Anador
Colusa
Eldorado
Nevada
Placer
Finn«
Sacronmto
Sierra
Yolo
Sacrenmto
Alaneda
Centra Costa
Matin
ttaxa
San Bertto
San Francisco
Sin tfeteo
Santa Clara
Solano
San FranciscoCekland

14,201

Census
Cccparative
Gain

2,491,889 1,829,303 -8,768
339.242
112,697 185,185
2,831,131 1,942,000 176,417

279,100 269,900 9,200
83.200 34,500 48,700
362,300 304,400 57,900

0
0
0
0
0
14,100
0
0

0
0
0
0
0
0
1,200
0
1,200
2,100
0
0
2,100
0
0
0
0
0
0
16,000
0
0

14,100

16,000

19,700
14,900

25,400 -5.700
14,300
600

0
0
0
0
0
0

11,207

2,846
5,148
7,994

1,306
-1.026
280

-89
4,284
4,194

885
13,103
13,983

525
8,380
8,906

166
1.648
1,814

51,561
4,876
56,437

6,882
1,613
8,4%

39,738
4,237
43,975

23,019
2,440
25,459

8,271
902
9,173

25,602
9,914
2,355
37,871

20,082
8,736
3,305
32,123

1,765
330
4,316
780

14,979
5,269
847
21,095

9,621
4,599
1,348
15,568

1,827
-1,018
-9%
-187

3,000

3,969
4,607
16,463
8,331
26,449

-50
113
3.972
180
2,920
-684

1,822
1,747
6,507
3,553
11,800
1,881
119,297
364
12,913
159,884

1,382
1,230
3,483
2,314
5,881
1,772
85,843
457
7,336
109,107

-67

800

227,013
797
33,786
325,592

3,423
4,563
10,567
6,859
19,465
4,259
184,009
812
24,831
258,838

416,670
211,006
80,620
28,756
6,530
318,311
241,036
409,077
50,128

337,480 -5,777
142,569 33.965
51.660 14,211
2,044
21,495
5,682
779
331,156 -83,800
175,099 23,475
228,156 117,790
33,038
3,752

294,814
96,912
30,144
12,709
3,754
401,863
154.195
310.392

209,450
59,432
16,895
8,141

1,762,134 1,331,335 101,436

1,326,995

10,001

4,in

0

*116
3,946
10,278

5,1%

Largest Fires
Siployment
1970
1960 Change

6,011

22,212

2,020

321.552
B5.013
138,287
12,768

66

1,743
390
3,761
-541
1,950
-261
2.885
9,926
8,4%
15,668
7,043
1,580
993
-37,699
38,982
121,354
4,758

853,558 161,180

1,400
700

2,100
3,000

0
0

1,000
900
0

0
0
0
0
0
0
200
700
900
900

0
0

900
800

0
0
0
0
0
-1,900
0
0
-1,100

0 1,000
0
0
0
4,000 11,900 -7,900
23,100 12,900 10,200
66,600 35,300 31,300
0
0
0
900

130,200 100,700 29,500

Govern- EduTe^er- Wage Land
tent cation ature
Value

Dis­
tance

758
767
758

53.1
57.7
53.5

61.9
62.6
61.9

2.76 1384
2.93 4594
2.79 2326

0

732
881
833

44.7
40.6
42.7

62.3
62.3
62.3

2.54 762
2.57 352
2.54 577

38

811
1007
996

48.1
39.1
39.8

61.3
61.3
61.3

2.21

87
2.41 412
2.41 338

50

802
760
799

36.5
46.2
37.4

60.5
60.5
60.5

2.54 678
2.66 126
2.55 583

25

827
779
902
821

46.8
46.3
40.9
46.1

63.2
63.2
63.2
63.2

2.95 127
2.81 115
2.80 80
2.88 117

145

900
1155
1144
844
885
1030
785
1444
736
320

45.9
47.5
48.1
46.2
43.6
44.6
55.8
46.8
47.0
52.8

60.7
60.7
60.7
60.7
60.2
60.7
60.7
60.7
60.9
60.7

2.84
2.17
2.75
2.57
2.77
2.69
3.15
2.30
2.90
2.95

772
891
774
619
678
814
798
923
788

51.7
55.3
67.1
44.6
34.4
51.0
61.9
56.2
49.1

57.5
60.4
57.2
58.3
57.5
56.9
58.7
59.4
60.5

3.08 823
3.37 1057
2.97 610
2.68 534
3.23 207
3.12 82981
3.15 1066
3.02 1577
2.79 484

820

54.0

57.5

3.10 702

146
308
326
176
433
153
539
90
606
401

0

0

165

24,202

11,256
9.695
20,951

Sutter
Yiia
Msupville

Cmsus
Ehpluytmt
1970
1959

Appendix Table 1. Continued,

Census
MplcyTomr
1970
1960

Census
Ccqaarative
Gain

Census
Ecploymeit
1970
1959

Census
Cocparative
Gain

largest Firms
Ehployment
1970
1960 Change

0

0

Govern- EduTeiper- Wage land
tEnt caticn abate
Value

4,607
104,679
164,989

691
28,464
21,607

3.303
86,169
125.333

2,295
52,283
73,982

166
14,698
24,200

3,500
15,000

2,500
9,000

0
1,000
6,000

1079
811
734

52.5
49.4
4S.4

63.8
63.1
63.8

2,48 49
2.53 1125
3.09 291

380,974

274,275

50,762

214,805

128,560

39,064

18,500

11,500

7,000

768

48.8

63.8

2.68

472

lake
Hmdociro
Scnxna
Santa Rosa

5,793
17,233
67,753
90,779

4,324
16,123
48,307
68,754

955
-1,742
9,670
8,842

1,941
9,171
33,371
44,483

8.893
19,947
29,862

544
-2,986
6,103
3.661

0
0
0
0

Salivas

77,690

55,296

14,284

41,505

23,972

8,735

San M e ®

430,495

311,911

43,149

290,958

202,801

Calaveras
San Joaquin
Stockton

4,278
101,430
105,708

3.658
88,331
91,989

-1
-1,116
-1,117

1,730
59.014
60,744

San Luis 0b.

35,687

26.936

3,444

Santa Barbara

94,980

61,937

Santa Cruz

44,025

Kings
Tulare
Visalia-Hsnf.
Ventura-Ck.
ttxbe
Siskiyou
Alpine
Lassen
ttxD
Sources:

0
0
0
0

708
653
802
762

40.1
41.4
43.9
43.0

59.2
59.2
57.6
57.6

1.84
2,76
2,65
2.69

307
137
643
333

50

700

0
0
0
0
0

700

6B3

49.4

57.2

2.50 369

45

13,729

39,200

29,300

9,900

698

54.6

63.2

3.17 744

1,697
39,663
41,360

-590
4,795
4,205

0

0

1,800
1,800

1,300
1,800

736
864
859

39.8
36.9
37.0

61.3
61.3
61.3

2.78 132
2.63 779
2.64 566

14,702

9,833

1,260

0

754

46.0

59.1

2.48 189

18,424

60,868

30,225

19,550

5,300

5,300

743

55.9

60.3

2.66

410

0

28,404

9,989

24,653

12,642

7,376

43.1

56.8

2.43 1254

25

83,502

1,372
6,708
8,079

7,733
29,325
37.108

5,280
17,808
23,088

565
4,981
5,646

0
0
0
0

906

15,839
56,923
72,762

0
0
0
0
0
0

823
850
843

33.8
33.1
33.3

64.1
64.1
64.1

2,75 354
2.24 764
2.32 606

72
65
65

131,901

67,851

43,624

58,932

29,546

18,543

846

47.0

59.3

2.72 2130

0

2,917
11,280
194
5,232
1,764

3,184
12,208
106
4,778
1,069

800
5,746

662
5,925

269

50.5
44.3
32.9
42.4
62.1

55,8
55.8
49.5
49.5
49.5

2.83
2.71

1,924
1,293

105
-2,353
55
-353
925

66

1,022

0

8
1,666

0
0
0
0
5,500

0
0
0
0

900

600

0
0
0
0

900

0
0
0
0

4,900

0 1011
0 836
0 1916
0 718
0 2008

89
95
191
2.61 62
3.83 118

0
0
95

225
225
140
140
140

1. Qxxities « d Basic Trading Areas: 1970 Rand tfcfjally Gonngrical Atlas and Marketing Guide, Rand ffcfiilly and Cccpany,
U.S. Bureau of the Census. Census of Population. General Social and Economic Characteristics of the Fopnlsrtnn. I960 and
1970. W f h l g m wd_C^iJEom^.
3. Gaiety Business Patterns (ffig) Ihploynmt: U.S. Bureau of the Ggtsus,County Business Patterns. 1959 and 1970. HtAjgan and California.
4. Largest Firms I^loynmt (LIE); Sales Hmageoott, The Sales Managaamt Directory of Key Plants. New York, 1960.
5. Govexruenr Expenditures: U.S. Bureau of the Census. Casus of Qwermcnts. 1962 aid 1967.
6. Edeatim: U.S. Bureau of the Census, Cmsus of faouLadm. i960.
7. Ta^wrature: U.S. Weather Bureau, local Qirntolngicsl Data.
8. Wage: U.S. Bureau of the Census, Cowty and City Data book. 1967. Wages entire year, divided by nmfcer of aan-hours).
9. land Value: U.S. Bureau of the Cmsus. Camry m d City Data Bock. 1967.
10. ttatmce: 1970 Rand Mdially Cann»p-lal Atlas gxi Marketing Guide (HEaiured fitra a map).
2. Gsbub Employment:

166

5,951
LSI.760
223,263

Inyo
Riverside
San Bemadino
San BemadinoRiverside

Distance

167

Appendix Table 2.

List of firms' names Included in the analysis. *

Gulf Oil
U.S. Steel
Mtstinghouse Electric
Standard Oil of California
LLng-Temoo-Vbught
Standard Oil (Ind.)
Boeing
E.I. du Pont de Nemours
Shell Oil
General Telephone 6 Electronics

h*

Standard Oil (N.J.}
Ftird Motor
General Electric
International Business Machines
ffcfail Oil
Chrysler
International Tel. t Tel.
Texaco
Hbstern Electric

Q <
D O -4 0t In ^ W K> I-1

1. General Matora

2.
3.
4.
5.
6.
7.
8.
9.
10.

utotoMtoiofcjiOfcJki

Swift
Chian Carbide
Proctor 6 Garble
Bethehem Steel
Eastman Kodak
Kraftco
Greyhomd
Atlantic Richfield

31.
32.
33.
34.
35.
36.
37.
38.
39.
40.

Continental Oil
International Harvester
Lockheed Aircraft
Tetmeoo
North American Rockwell
Litton Industries
United Aircraft
Firestone Tire * Rubber
Phillips Petroleum
Occidental Fetroleun

41,
42.
43.
44.
45.
46.
47.
48.
49.
50.

General Dynanics
Caterpillar Tractor
Singer
McDonnell Douglas
General Pboda
Continental Can
Monsanto
S m Oil
Honeywell
W.R. Grace

51.
52.
53.
54.
55.
56.
57.
58.
59.
60.

Dow Chemical
Intemation Paper
American Can
Barden
Rapid-American
Burlington Industries
Uiion cdl of California
R.J. Reynolds Industries
Sperry Rand
Xerox

0^(D%J9iU)*UI>JH

<nutiAini/iuiLfttntntji

O\0O^Ct^^UN)H

0«0>J

Al^»U

KJH

w

0«Q^AUI*U^H

21.
22.
23.
24.
25.
26.
27.
28.
29.
30.

^ u u u u u u y u <

i o m h m h p h m m h

11.
12.
13.
14.
15.
16.
17.
18.
19.
20.

RCA

OtrA»»»* 'rtrn £

64.
65.
66.
67.
68.
69.
70.

Consolidated Poods
Gulf & Western Industries
Textron
Coca-Cola
TPW
Armoo Steel
Beatrice Foods

71.
72.
73.
74.
75.
76.
77.
78.
79.
80.

Ralston Purina
Uniroyal
Alunimm Co. of America
American Brands
Bendix
National Cash Register
American Standard
Signal Ctnpsnies
Ashland Oil
(X«ens-Illinois

Bl.
82.
83.
84.
B5.
86.
87.
88.
89.
90.

United Brands
CPC International
Standard Oil (Chic)
Republic Steel
U.S. PIywrryi-rtiM'nplm PBpnrn
IMS
American Hcmo Products
Raytheon
Warner-Latrbert
Genesee

AAA

131.
132.
133.
134.
135.
136.
137.
138.
139.
140.

91.
92.
93.
94.
95.
96.
97.
9B.
99.
100.

Allied Chemical
National Steel
Weyerhaeuser
U.S. Industries
Getty Oil
Teledyne
Colgate-Palmolive
B.F. Goodrich
Georgia-Pacific
Whirlpool

101.
102.
103.
104.
105.
106.
107.
108.
109.
110.

inland Steel
Anerican Cyanamid
Deere
Ogden
Kenneaott Copper
Olin
PepsiCo
Borg Warner
PPG Industries
American Motors

111.
112.
113.
114.
115.
116.
117.
118.
119.
120.

Amerada Hess
Camatlcn
Mead
Oelanese
Reynolds Metals
General Mills
Norton Simon
Marathon Oil
Standard Brands
Johnson 6 Johnson

121.
122.
123.
124.
61. Boise Cascade
125.
62. Cities Service
63. Minnesota Mining 6 Manufacturing 126.
WWH

127. CarpbGll Sovp
128. Crown Zelterbach
129. Ccrrbusticn Engineer­
ing
130. Martin Marietta

Eaton Vale k Towns
GruEtm
Philip Morris
Bristol-Myers
General Tire t Rtober
Anaconda

National Load
Iykes-Youngs town
J.P. Stevens
Burroughs
H.J. Heinz
Kaiser Alurdnun &
Chemical
International Utili­
ties
Pfizer
A 1 H n-Chalmers Manu­
facturing
National Biscuit

141. Kimberly-Clark
142. Vtiittaker
143. Studebaker-Wbrthington
144. St.Regis Paper
145. SCM
146. American Matal Climax
147. Texas Instrunents
148. Baboodc ( Wilcox
149. Walter Xidde
150. Write Motor
151,
152.
153.
154.
155.
156.
157.
158.
159.
160.

Hercules
Motorola
Anheuser-Busch
Dress Industries
Interoo
Ihelps Dodge
Ingarsoll-Rand
Avon Products
Avoo
Scott Paper

161. Illinois Central Ind.
162. htarck
163. American Melting fi
Refining
164. Iowa Beef Processors
165. Wilts Consolidated
Industries
166. United Merchants t
Manufacturers
167. Squibb Booch-Nut
168. Dart Industries
169. Goo. A. Hormel
170. Pullman
171.
172.
173.
174.
175.
176.
177.
178.
179.
180.

Otis Elevator
Del Monte
Crane
Central Soya
Pillabury
Gillette
Jim Walter
Clark Equipment
Dana
National Distillers
k Chemical

168

Appendix Table 2

. Continued.

181.
182.
183.
184.
185.
186.
187.
188.
189.
190.

Colt Industries
Pet
Bremen Electric
land O'lakes
Anderson, Clayton
AMP
Time Inc.
McGraw Edison
Northrop
Oscar Mayer

191.
192.
193.
194.
195.
196.
197.
198.
199.
200.

Kellogg
Farmland Industries
GiF
Agway
Quaker Oats
Starling Drug
Carrier
Coming Glass Wbrks
Eli Lilly
Essex International

201.
202.
203.
204.
205.
206.
207.
208.
209.
210.

Lear Siegler
Times Mirror
Fruehauf
Tecunseh Products
Upjohn
Kaiser Steel
Kelsey-Hayes
Di Giorgio
Ex-Cell-0
Hygrade Fbod Products

211.
212.
213.
214.
215.
216.
217.
218.
219.
220.

Hewlett-Packard
Levi Strauss
Purex
Potlatch Forests
Airpex
Mattel
Bohr
Norris Industries
Federal-Mogul
Republic

221. Fairchild Camera I
Instrument
222. Garber Products
223. Mclouth Steel
224. Autonation industries
225. Varian Associates
226. Max Factor
227. Areata National
228. Capitol industries
229. Hoover Ball & Bearing
230. Fibreboard
231. Philco Ford
232. Socony Mobil oil
233. Virginia-Carolina
Chemicals
234. Grinnell
235. Rayonnier
236. Continental Baking
237. Spencer Chemical
238. Jones I laughlin Steel
239. ling Altec Electronics
240. Wilson

Ling-tanoo Electronics
Temoo Aircraft
Chance Vbught
Radio Corporation of
America
National Dairy Products
Armour
Baldwin Lima Hamilton
Atlantic Refining
Sinclair Oil
Richfield Oil

United Fruit
American SealCap
John Harrell
C o m Products
U.S. Plywood
Chsipion Papers
Link Belt
American Viscose
Ftod Machinery &
Chemical
310. Ekoo Products
311.
312.
313.
314.

255.
256.
257.
258.
259.
260.

Consolidation Cool
American Agr. Chemical
J.l. Case
Packaging Corp. of
America
Tennesee Gas Transmission
Newport News Shipbuilding
Kern County Land
North American Aviation
Rockwell-Standard
Middle-Qoss Dexter

261.
262.
263.
264.
265.
266.
267.
268.
269.
270.

Royal McBee
Hooker Chemical
Island Creek Coal
Singer Manufacturing
General Precision Equipment
Friden
Douglas Aircraft
McDonnell Aircraft
Surray DX oil
Surray Mid Continent Oil

241.
242.
243.
244.
245.
246.
247.
248.
249.
250.
251.
252.
253.
254.

271. Minneapolis-Honeywell
Regulator
272. BVD
273. Stanley Warner
274. Glen Alden
275. Schenlay Industries
276. Pure Oil
277. R.J. Reynolds Tbbacoo
278. McLean Industries
279. Tennesse Corporation
280. Cbluibia Charbon
2B1.
2B2.
283.
284.
285.
286.
287.
288.
289.
290.

Brown
Universal Anerican
E.W. Bliss
Consolidated Cigars
Spencer Kellog & Sons
Bell Aircraft
Dutcan Foods
Thcrpson Roto Mboldridge
U.S. Rdbber
Sunshine Biscuits

291.
292.
293.
294.
295.
296.
297.
298.
299.
300.

AndrtM-Jergens
American Ibbaoco
American Ftxreat Products
Wbatirvghouse Air Brake
American Radiator 6 Standard
Signal Oil 6 Gas
Mack Trucks
Garret
Ashland Oil t Refining
AMK

301.
302.
303.
304.
305.
306.
307.
308.
309.

320.

American Optical
Parke Davis
Vfamer-Ianbert Eham.
Union Texas Natural
Gas
Tidewater Oil
Stelly Oil
Ryan Aeronautical
Peabody Coal
Olin Mathieson Chem­
ical
Pepsi-Cola

321.
322.
323.
324.
325,
326.
327.
328.
329.
330.

Frito-Lay
Pittsburg Plate Glass
Hess Oil t Chemical
Oliver
Amerada Petrolmm
Wbodward Iron
W.P. Fuller
Hunt Fbod Industries
McCall
Canada Dry

331.
332.
333.
334.

Ohio Oil
Plymouth oil
Eaton Manufacturing
Yale & ibwne Manu­
facturing '«■
Gnznnan Aircraft En­
gineering
Mead Johnson
Anaconda Hire 6 Cable
American Marietta
Martin
Harvey Aluninium

315.
316.
317.
318.
319.

335.
336.
337.
338.
339.
340.

341. Glenn L. Martin
342. Lykas
343. Youngstown Sheet 6
Tihe
344. Chaa. Pfizer
345. Teleocnputing
346. Mtrthingten
347. Studebaksr
348. Studebaker-Packard
349. Alco Products
350. Gliddnn
351.
352.
353.
354.
355.

ani th-Corona-Ehrthart
American Metal
U.S. Lines
Oliver
Horbison-Vtalker Re­
fractories
356. International S u e
357. Paul Revere Life
358. Iowa Beef Packers

169
Appendix Table 2.

Continued.

359. H h jp
360. Blow-Knox
361.
362.
363.
364.
365.
366.
367.
360.
369.
370.

Ulito Sewing Machine
Baech-Nut Life Savers
Ftexall Drugg & Chemical
California Packing
CF S. I Steel
Colorado Fuel & Iron
U.S. Pipes a Foundry
Bridgeport Brass
Crucible Steel
Fairbanks Vtiitney

371.
372.
373.
374.

379.
380.

PetMilk
American Machine t Foundry
McGraw Electric
Consumers Cooperatives Asso­
ciation
General Oniline & Film
Riberoid
Cocp. Grange League Fed.
Exchange
Eastern States Farmer's
Exchange
Essex Hire
Siegler

381.
382.
383.
304.
385.
386.
387.
388.
339.
390.

Lear
Republic Pictures
Fibreboard Paper Products
Pabeo Products
Federal Electric
Industrial Asphalt Inc.
Amoco Qranicals
Lenkurt Electric
Stranberg Datagraphix
Westab

400.
401.
402.
403.
404.
405.
406.
407.
408.
409.
410.

Glass Containers
United Can
American Petrochemical
Tasker Industries
Pendleton Tools Industries
Granny Goose Food3
Pratt 6 Wiitney
Vbit W.J. Rubber
Haste King
Michigan Fruit Canners
Charndn Paper Products

375.
376.
377.
370.

411.
412.
413.
414.
415.
416.
417.
418.
419.
420.

Holley Carburator
Escanaba Paper
Aliminiun Extrusion
Michigan Tool
Gibson Product
Keeler Brass
Dew d o m i n g
Kawneer
Motor Vheel
Allied Paper

421.
422.
423.
424.
425.

Kalornzoo Paper
Cadillac Gage
Canpbell Wyant 6 Canro Ft).
Tyler Refrigerator
Wagner Industries

^ The first 200 names are the nones of the largest corporations in 1970. The next 30 nones
are oaipanies which were among the 500 largest in 1970 and had their headquarters in Mich­
igan or California. The remaining are old or local names of ocrpanies already included
or ocrpanies which were merged by these during the period 1960 to 1970.

Sources:

Fortune Directory of the 500 largest Industrial Corporation, Fortune, May, 1971.
Moody's Industrial Manual, 1970.

Appendix Table 3.

Variable

Constant

Regression Statistics for the Function X, = f(X?,. . .,X,n) , Unit of Observation:
BTA, Detroit, Area Dropped.

Regression
Coefficient

Standard
Errors of
Coefficient

T
Value

Significance

-.001

.016

-.08

.94

large Finns

2.20

.745

2.95

Wage
Land
Distance
Dumry
R2
F Value

R2
Deletes

Partial
Correlation

-32,172

Employment-60
Education

Beta
Weights

-.02

.94

-.01

.006

.75

.92

.44

.18

.92

*44

837

283

2.95

.006

-1,085

4,206

-.26

.80

-.01

.93

-.04

2.23

.03

.16

.92

.35

-.56

.58

-.03

.93

-.09

.54

.59

.03

.93

.09

9.70
-12.38

4.34
22.1
3,097

1,676
.933
72.0

Appendix Table 4. Regression Statistics for the Function X* = f(JU,. . .,X-0), Unit of Observation: BTA,
Detroit, Los Angeles and San Francisco-Oakland Areas Dropped,

Variable

Constant

Regression
Coefficient

Standard
Errors of
Coefficient

T
Value

Significance

Beta
Weights

R2
Deletes

Partial
Correlation

-23,091

Employment-60

-.051

.021

2.43

.021

.28

.77

.38

large Firms

1.98

.600

3.31

.002

.35

.75

.49

Education
Wage

625

233

2.68

.011

.27

.77

.42

-3,822

3,400

-1.12

.269

-.11

.80

-.19

4.37

<.0005

.45

.70

.60

.65

.518

.07

.81

.11

-.12

.909

-.01

.81

-.02

land

16.15

Distance

12.17

EXiTTTy

R2
F Value

-285

3.690
18.62
2,437

.81
20.4

BIBLIOGRAPHY

BIBLIOGRAPHY

Adams, W . , 1961.
The S t r u c t u r e of A m e r i c a n
Ca se S t u d i e s . New York:
Ma cmillan.
Ashby,

Industry:

Some

L. D. , 1964.
"Regi o n a l Ch ange in a N a t i o n a l S e t t i n g . "
Staff W o r k i n g Pa per in E c o n o m i c an d Statist ics, No.
7, U.S. D e p a r t m e n t of Comme rce, April.

Blalock, H. M . , 1964.
Causal
R e s e a r c h . Chapel Hill":
Press.

Inf ere nce s in N o n e x p e r i m e n t a l
U n i v e r s i t y of N orth C a r olina

Blu estone, H . , 1970.
"Focus for A r e a D e v e l o p m e n t Analysis:
U rba n O r i e n t a t i o n of C o u n t i e s , " A E R No. 1 8 5 , ERS,
U.S. D e p a r t m e n t of A g riculture, May.
Bonnen, J. T . , 1968.
"Pro gress and Poverty:
Th e Pe opl e
Left B e h i n d . "
Paper p r e p a r e d for p r e s e n t a t i o n at
the Mi n n e a p o l i s Farm F orum in M i n n e a p o l i s , Minn.,
M arc h 6.
Burrows, J. C . ; Metcalf, C. E . ; and Kaler, J. B . , 1971.
Indus tri al Lo cation in the Uni t e d States, An E c o n o ­
m e t r i c A n a l y s i s . A Charle s River A s s o c i a t e s Research
Study.
Lexington, Mass.:
H eath L e x i n g t o n Books.
Chenery, H . , 1959.
"The I n t e r d e p e n d e n c e of Investm ent
D e c i s i o n s , " Th e A l l o c a t i o n of E c o n o m i c R e s o u r c e s .
Stanford, C a l i f . : S t a n f o r d U n i v e r s i t y Press.
Chinitz, B . , and Vernon, R . , 1960.
" C h a n g i n g Forces in
Industrial Loca t i o n , " H a r v a r d B u s i n e s s R e v i e w ,
January-February.
Crocker, T. D. and Rogers, A. J . , 1971.
Environmental
E c o n o m i c s . Hinsdale, 111.:
The D r y d e n Press, Inc.
Downs,

A., 1970.
Urban Pr oblems and P r o s p e c t s . M a r k h a m
Series in Pub lic Pol icy Ana lys is^
Chicago.

Dun and Br adstreet, 1970.
R e f e r e n c e Book of Manu f a c t u r e r s ,
Fall 1970.
New York:
Du n anil B r a d s treet, Ihe"”

172

173
Duncan, 0. D. and Reiss, A. J . , Jr., 1956.
Social
C h a r a c t e r i s t i c s of U rba n and Rur al Com munities,
New York:
J o h n W i l e y and S o n s , I n c .

1950.

Edwards, C . ; Coltrane, R . ; and Da be rkow, S., 1971.
"Reg ion al V a r i a t i o n s in E c o n o m i c Grow t h an d D e v e l o p ­
me nt w i t h E m p hasis on Rural A r e a s , " A E R No. 20 5 .
ERS, U.S. Dep a r t m e n t of A g r i c u l t u r e , May
Epp,

J . , 1970.
"In Sear ch of a Bett e r D i s t r i b u t i o n of
Population, W h a t A r e the Key D e t e r m i n a n t s ? , " A m e r i c a n
J o u r n al of A g r i c u l t u r a l Economics, Vol. 52, No. 5,
December.

Estall, K. C. and Buch anan, R. 0., 1966.
Indus tri al
A c t i v i t y and E c o n o m i c Geo g raphy, A S t u d y of the
Forces Be hind the G e o g r a p h i c L o c a t i o n of P r o d u c t i o n
A c t i v i t y in M a n u f a c t u r i n g I n d u s t r y . London:
H u t c h i n s o n U n i v e r s i t y Library.
Everett, R. 0. and Leach, R. H. (eds.), 1965.
Urban
Probl ems and P r o p s e c t s . Ne w York:
Oceana Publica­
tion j Inc.', Dobbs Ferry
Faux,

G. , 1972.
" A b s e n t e e Owne rs of Amer i c a - I , Co loni al
N e w England," The Ne w R e p u b l i c . N o v e m b e r 25.

Fortune, 19 71.
F ortu ne D i r e c t o r y of the 500 Largest U.S.
Industrial C o r p o r a t i o n s . C h i c a g o : TTine^incT," May
Friedman, J. R. P.,
Development,"
Fuchs,

1956.
" L o c a t i o n a l As p e c t s of Econo m i c
Land E c o n o m i c s , Vol. 32, No. 3, August.

V. R . , 1965.
Chan ges in the L o c a t i o n of M a n u f a c ­
tu ring in the U ni t e d States ^ i n c e 1 9 2 9 . N ew H a v e n
and London:
Y a l e U n i v e r s i t y Press.

Gabler, L. R . , 1971.
" P o p u l a t i o n Si ze as a D e t e r m i n a n t
o f City E x p enditures and E m p l o y m e n t - - S o m e F urther
Ev ide nce," Land E c o n o m i c s , Vol. 47, May.
Galbraith, J.
Boston:

K . , 1973.
Economi cs and the Pu bli c P u r p o s e .
H o u g h t o n M i f f l i n Co.

_________ , 1968.
The Ne w Ind us tria l S t a t e . A Sig n et Book
P u b l i s h e d by the New A m e r i c a n Library, October.
Halpern, J . , 1970.
"In Sea r c h of a B e t t e r D i s t r i b u t i o n of
Popu lati on, W h a t Are the Key D e terminants?, D i s c u s s i o n "
A m e r i c a n Journal of A g r i c u l t u r a l E c o n o m i c s , Vol. 52,
Nck 5 ] December.

174
Hathaway, D. £. ; Beegle, J. A.; and Bryant, W. K . , 1968.
People o f Rural America, A 1960 Census M o n o g r a p h .
IT S . D e p a r t m e n t of Com merc e, B u r e a u of the C e n s u s .
Hoover, E. M. , 1948,
Th e L o c a t i o n of E c o n o m i c A c t i v i t y .
New York, Toron to, London:
M c G r a w - H i l l Book Company,
Inc.
Inte rnational I n f o r m a t i o n Ce nt er for Local Credit, 1964.
Go ver nment M e a s u r e s for the P r o m o t i o n of Regional
Econo mic D e v e l o p m e n t , R esul ts of a St udy C a r r i e d Out
in Diff e r e n t Count Ties'. The Hague Mart intis Nijkoff.
Isard, W . , 1956.
L o c a t i o n and S p a c e - E c o n o m y . N e w York:
P ubl i s h e d j ointly7 by the T e c h n o l o g y Press of M a s s a ­
chusetts Insti t u t e of T e c h n o l o g y a n d J o h n W i l e y and
Sons, Inc.
London:
C h a p m a n and Hall, Ltd.
Jacobs, J., 1960.
Th e D eath and Life of Great A m e r i c a n
C i t i e s . New York:
V i n t a g e Books.
Kmenta, J . , 1971.
Macmillan.

Elements

of E c o n o m e t r i c s .

N ew York:

M a r k e t St atistics, Inc., 1970.
Market S t a t i s t i c s Key
Plants 1 9 7 0 - 7 1 . Ne w York:
Market Sta tistics, Inc.
Mo ody' s Invest ors Service, Inc., 1971.
M o o d y ' s Industrial
Manual.
Ne w York:
Mo o d y ' s Investors Service, I n c .
Mueller, E. and Mo rg an , J. N . , 1962.
" L o c a t i o n Decisions
of M a n u f a c t u r e r s , " A m e r i c a n E c o nomic Review, Vol. 52,
N o . 2.
Mueller, W. F . , 1972.
"Im pac t of C h a n g i n g Industrial
O r g a nizations on C o m m u n i t y D e v e l o p m e n t . "
Paper
pres e n t e d at the Ann u a l M e e t i n g of the A m e r i c a n
A g r i c u l t u r a l E c o n o m i c s Associ ati on, Aug u s t 22.
(Unpublished).
National Ac a d e m y of Sciences, 1971.
The Qu a l i t y of Rural
L i v i n g . P r o c e e d i n g s of a Workshop.
Wash ing ton, D7C.
Natio nal Area D e v e l o p m e n t Inst itute, 1972.
"New Nonraetro
De v e l o p m e n t Law:
What ' s In It," A m e r i c a n D e v e l o p ­
ment I n t e r c h a n g e . Vol. II, No. 18"j September, 15.
Na tional Goals R e s e a r c h Staff, 1970.
A Re por t T o w a r d
B a lanced Growth:
Quantity with Quality. Washington,
D. C. , J u l y 4.

175

Neutze, J. M . , 1967.
E c o n o m i c P o l i c y and th e Siz e of
C i t i e s . London:
F r a n k Cass a n d Co. , I7td.
Perloff, H. S., w i t h Dodds, W. V., 1963.
H o w a Region
Grows, A r e a D e v e l o p m e n t in the U.S. E c o n o m y .
S u p p l e m e n t a r y P aper No. 17', P u b l i s h e d by the
C o m m i t t e e for E c o n o m i c D e velopment.
Perroux, F . , 1955.
" Note sur la N o t i d n de P61e de C r o i s s a n c e ,"
E c o n o m i e A p p l i q u e s , July.
Pr e s i d e n t ' s National A d v i s o r y C o m m i s s i o n on Rural Poverty,
1968.
Rural P o v e r t y in the U n i t e d S t a t e s . W a s h i n g - -----ton, D.C.
Rand M c N a l l y and Company, 1970.
Rand McNally Commercial
Atlas and M a r k e t i n g G u i d e .
Richardson, H. W . , 1969.
Regional Economics Location
T h e o r y - - U r b a n S t r u c t u r e - - R e g i o n a l Chang~e"l N e w Y o r k ,
W a s h i n g t o n : P r a e g e r Pu bli shers.
Sales Ma n a g e m e n t , 1960.
Th e Sales M a n a g e m e n t D i r e c t o r y
of Key P l a n t s . N e w York:
Sales Manage ment.
November.
Schmid, A. A., 1968.
" E c o n o m i c T h e o r y o f S pace for Land
Se t t l e m e n t Poli c y A n a l y s i s , " Land S e t t l e m e n t P o l i c y .
S e m i n a r S o u t h e r n Land E c o n o m i c s R e s e a r c h Com mittee,
N o r t h C a r o l i n a S tate Un i v e r s i t y , A g r i c u l t u r a l Policy
Institute, April 22-23.
Teferti lle r, K . , 1973.
"Rur a l D e v e l o p m e n t in an U r b a n A g e , "
A m e r i c a n Jou r n a l of A g r i c u l t u r a l E c o n o m i c s , Vol. 55,
No. 5"^ D e c e m b e r .
Tiebout, C . , 1965.
"T he E c o n o m i c s of C o m m u n i t y Gr owth,"
Comm u n i t y R e s o u r c e D e v e l o p m e n t . P r o c e e d i n g s of
First N a t ional E x t e n s i o n W o r k s h o p in C o m m u n i t y
R e s o u r c e D e v elopment, M i c h i g a n S t a t e Univ ersity,
Jul y 12-30.
Tweeten, L . , 1972.
R e s e a r c h A p p l i c a t i o n in Rural Eco nom ic
D e v e l o p m e n t and Planning.
Agricultural Experiment
Station, O k l a h o m a S t a t e U n i v e r s i t y R e s e a r c h Rep ort
P-665, July.
U.S.

B u r e a u of the Budget, 1967.
S t a n d a r d In dustrial
C l a s s i f i c a t i o n M a n u a l . W a s h i n g t o n , D , C . : Gov e r n m e n t
P r i n t i n g Office.

U.S.

B u r e a u of the Census, 1971.
1970 Ce ns us of P o p u l a t i o n
and H o u s i n g , " G e neral D e m o g r a p h i c Tr en ds for Metrop o l i t a n Areas, 1960 to 19 70."
PHC( 2)- 1, Wa s h i n g t o n ,
D.C., Ta bles 6,11 and 11a and Co mp utations.

176

_

, 1971.

Coun ty B u s i n e s s Patterns, 1970, M i c h i g a n .
Gov e rnment P r i n t i n g Office,
70-24.

Washington, D .C . :

CBP-

_

, 1972.
"Pro jections of the P o p u l a t i o n of the
Unit e d States, by A g e and Sex:
1972 to 2020,"
Current P o p u l a t i o n R e p o r t s . Washington, D.C.:
IT73"! Gove rnm ent Printing Office, Series P-25, No.
493.
U.S.

Congress, 1971.
" A g r i c u l t u r a l Act of 19 70, " Public
Law 91-524, Statu tes at L a r g e , Vol. 84, Part I.

_

, 1973.
"Rural D e v e l o p m e n t Ac t of 19 72 ," Public
Law 92-419, Statu tes at L a r g e , Vol. 86.
U.S.

Congress,
America:

1967.
J oint E c o n o m i c Com mittee, Urban
Goals and P r o b l e m s . Was hington.

U.S.

Congress, Senate, 1972.
Irwin, Comm i t t e e Print,
Was hin gto n, D.C.

U.S.

Dep artment of Labor, 1972.
E m p l o y m e n t and Earnings,
States and Areas, 1939-1970"
Wa s h i n g t o n ^ D . C . :
Bur e a u of Labor Statistics.

Ru ral D e v e l o p m e n t , by R.
N o . 74-949, 92d Congress,

_

, 1972.
Emp l o y m e n t and Earnings, U n i t e d States,
1 9 0 9 - 1 9 7 1 . Was hing ton , D.C.^
B u r e a u of Labor
Statistics.

Wilson, J. Q . , e d . , 1967.
The M e t r o p o l i t a n Enigma,
Inquiries into the Nat ure and Dim e n s i o n s of A merica's
U r ban C r i s i s ^ Washi ngt on, D . ' C " . C h a m b e r of
Commer ce of the Uni t e d States.