1

By Ayanaw G.
 2
⚫ Regional economic development deals with regional
development using local regional resources.
⚫ It is based on variables controlled from the region rather
than on the outside resources from the national level.
⚫ Regional and local development is somewhat closely
related to intra-regional planning.
⚫ It deals with economic and spatial organization inside the
region.
⚫ It concerned with decisions aiming to stimulate and
facilitate the process of regional development within the
region.

By Ayanaw G.
 Local and Regional Economic
Development; Initiatives and
Actors 3

⚫ Many studies have been developed to show how

regional and local economic development can be
fostered or promoted in developed as well as developing
countries.
⚫ There are three initiatives to promote regional and
local economic development.
⚫ These are community economic development;
enterprise development and locality development and
planning models.

By Ayanaw G.
 4

⚫ Community economic development: It facilitate

household diversification of economic activities as the
principal way to improve livelihood and reduce poverty.
⚫ Aims of Community based economic development
 Stimulating a sense of communality
 Promoting self-help and empowerment
 Improving living and working conditions in settlements
 Creating public and community service.

By Ayanaw G.
 5

⚫ Enterprise development is in the form of clusters

of economic activities.
⚫ The targets of enterprise development are:
 Attracting firms from elsewhere
 Formation of new firms
 Expanding existing firms
 Innovating of Micro and Small Enterprises.

By Ayanaw G.
 6
⚫ Locality development and planning refers to
overall planning and management.
⚫ The components include:
 Physical planning and development controls
 Urban planning and design
 Expansion of infrastructure
 Distribution of socio-economic overhead capital.
 Basic actors in this process are: Local government
Central government Community organizations Local
producers and their associations.
By Ayanaw G.
 Theories of local and regional economic growth and
development
7

Paradigms and schools of thought of regional development

 Three distinct paradigms of regional development can be
recognized.
 Development of regions as the function of national
economic development: great value is attached to regional
planning as instrument in the development process.
 Dependent regional development: policies which creates
interdependence among regions for overall development.
 The territorial development: emphasizes the negative effects
of centralized planning tendencies and bureaucratic control.

By Ayanaw G.
 8

⚫ There are two dominant schools of thought on

regional development.
I. The development from above school
 Theconcept revolves growth takes place in
selected spatial entities and spreads outward.
 It argue that growth should start on few selected centers
and expand outwards.
 It think about the industrial and deliberate urbanization
strategy of development.

By Ayanaw G.
 9

II. The development from below school:

 This school strongly adheres to the basic concept of
the creation of indigenous dynamic development
impulses.
 It also stresses that the direction of development
options have to be reversed in space.
 The main argument of this school is that development
strategies and efforts should originate internally from
the natural and socio-economic and political factors.

By Ayanaw G.
 Resources and Regional
Development 1
0
⚫ Regional development is a multifaceted activity.
⚫ It requires material and non-material resource base.
⚫ Material bases allow production and consumption.
⚫ Non-material base facilitates and provides
enabling environment for development.
⚫ Non-material bases presuppose appropriate
policy, institutions and organizations.
⚫ Material bases are a function of resource
endowment and utilization.

By Ayanaw G.
Staples Theory of Regional growth-Focus on Natural Resources
1
1
⚫ Staple theory is an export-led growth theory which
emphasizes on staples or natural resources as a factor of
development.
⚫ Growth is stimulated by the direct investment in the
extraction of the staple and by the spread effects of
staple development.
⚫ In this model, regional economies with abundant supply
of easily accessible resources have a considerable
comparative advantage in the development process.

By Ayanaw G.
 Theories based on
demand/market1
2
⚫ This theory focuses on trade as engines of growth and
growth of exports provides productivity that benefit
regional economies.
⚫ It suggests that regional growth in output and
employment is a function of exogenous demand for a
region’s export.
⚫ Income growth associated with the growth of a region's
export results in further increases in demand for local
goods which in turn leads to further growth in regional
income.
By Ayanaw G.
 Theories Based on Space
1
3
⚫The concept of space in local and
regional development is multifaceted:
Geographic space refers to where things
are located on the earth’s surface;
Economic space refers to sets of economic relations
for example, a set of factories in a corporation.
 Social space refers to sets of social relations.

By Ayanaw G.
 1
4
⚫The concept of space theory describes a
hierarchical system of central places with each
element containing the same economic activity
as the elements below it plus an additional
number of activities.
⚫The importance of the theory for regional
development lies in its capacity to link urban and
rural economies through a system of collection
and distribution points.

By Ayanaw G.
 Growth center
theory 1
5
⚫ Growth does not appear simultaneously in all places of a
country.
⚫ It will appear in those places where activities
especially industries are relatively dynamic, use modern
technology, and are relatively big.
⚫ The bigger the firm, the more important the effects in its
economic space will tend to be.
⚫ The dynamics of these firms and their contribution to
regional economic growth depends on the demand
elasticities and their competitive abilities.
By Ayanaw G.
 Agropolitan Development
Theory 1
6
⚫This development theory refers to area-orientation
towards integrated rural development strategy.
⚫By identifying local resources and prior needs,
efforts are to be devoted to multi-sectoral
development in the specific rural area.
⚫Friedman formulates five basic dimensions of rural
development.

By Ayanaw G.
 1
7
I. Creating long term economic, social and
political viability of rural communities.
II. Expanding opportunities for productive work in rural
areas.
III. Continued upgrading and improvement of the natural
environment of rural communities.
IV. Providing of goods and services for the satisfaction of
locally determined basic needs.
V. Achieving balanced rural-urban development.

By Ayanaw G.
 1
8
 The major elements of agropolitan approach
I. The basic condition: selection of locations and
activities.
II. The expansion of production: include diversification
of agricultural production and augmenting the level
of industrial production.
III. The role of the state: The role of the state organized
on the basis of agropolitan principles is
developmental, facilitative, regulatory, redistributive,
and protective.

By Ayanaw G.
 Entrepreneurship theory for regional development
1
9
⚫ Entrepreneurship theory deals about the formation or
the addition of new enterprises to the economy by
human creativity.
⚫ The entrepreneur brings about change and innovation in
the economy by:
 Introducing a new or different quality of good
 Changing the method of producing good
 Exploring (developing) new markets
 Exploiting new sources of raw materials or
 Changing the organization of the industry

By Ayanaw G.
 New growth theories: Endogenous Growth
2
0
⚫ Endogenous growth theory simply means economic
growth from within a system, usually a nation-state.
⚫ There are a couple of reasons for the rise of endogenous
growth models.
⚫ The implication of endogenous growth theory is based
on the existence of positive externalities associated with
human capital formation and research and development
that lead to increasing returns.

By Ayanaw G.
 Flexible production and Flexible specialization theory
2
1
⚫ Flexible production for regional growth method refers
in general to the variety of ways in which
producers shift promptly from one process and or
product to another.
⚫ It adjust quantities of output upward and downward in
the short run without any strong harmful effect on levels
of productivity.
⚫ Flexible production in small and medium sized firms
occurs in a spatially concentrated manner.

By Ayanaw G.
 2
2
⚫ Three kinds of flexible production
contemporary agglomerations can
be recognized:
 Agglomeration of craft based design-intensive

industries
 Agglomeration of high technology
located at selectedindustries
sub-urban locations.
 Producer and financial service agglomeration

which should be found close to the central core of

large cities to facilitate production and market
transactions of firms and industries.
By Ayanaw G.
 Learning regions and innovative milieu theory
23

⚫ An innovative milieu is characterized by a certain

coherence based on common behavioral practices and
culture:
 A group of actors such as firms and institutions which are
autonomous in decision making and strategy
formulation.
 A specific set of material, immaterial and institutional
elements combining firms, infrastructure, knowledge,
know-how, authorities and legal frameworks.
 Interactions between actors based on cooperation
 A self regulating dynamics that leads to learning.
By Ayanaw G.
 2
4
⚫ There are four major factors that interact to
create national competitiveness and comparative
advantages
 Factor Conditions: Factors of production are the
basic inputs to competition
 Demand Condition: having sustainable and
growing local or external demand for its products.
 Context for firm strategy and rivalry: the climate
for investment and local policies and their effect on
rivalry.
 Related and supporting industries: The presence
By Ayanaw G.
and proximate suppliers of inputs reduces