Long-Run Planning for Capital and Labour Allocation in Space

Puu, T. (1982). Long-Run Planning for Capital and Labour Allocation in Space. IIASA Collaborative Paper. IIASA, Laxenburg, Austria: CP-82-011

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Abstract

Methodologically, the IIASA research program on Regional Development reflects the general attitude of the majority of regional scientists. Among other things, this means that the models developed deal with discrete sets of regions or locations. For specific planning purposes, this approach is extremely efficient, due to computational advantages. On the other hand, systematic information about regional structures, of the geometric flavor associated with classical location theory, is hard to obtain if one discretizes space from the outset.

To complement this main stream of regional analysis, two scientists currently trying to revive continuous modeling of the space economy, Martin J. Beckmann and Tonu Puu, were invited to IIASA in September 1979. They started writing a comprehensive monograph intended to present the state-of-the-art in the field of continuous regional modeling. The completion of such an extensive work was not possible in the brief period of three weeks.

The authors currently continued to work on the project. The present paper by Tonu Puu is one chapter of the forthcoming monograph, and it was finished during his renewed visit to IIASA in April 1982.

It deals with planning models for the allocation of available labor and capital resources within a continuous two-dimensional space economy. The main results of the paper concern the advantages of specialization and trade, in the absence of even comparative advantages or localized input supplies. So, the usual conditions for trade, as developed in general (spaceless) economic theory, are not needed, as specialization and trade seem to develop from the nature of bounded two-dimensional space itself.

Moreover, the close parallel between the planning and competitive equilibrium solutions is brought out.

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