The document discusses the relationship between connectivity, agglomeration, and regional economic development. It finds that while connectivity alone may not determine development, improvements in transport infrastructure can enhance regional attractiveness by reducing costs, allowing for larger scale production and investment across industries. This process may cause firms to migrate and cluster in regions with better connectivity, particularly if they benefit from localization economies, access to specialized labor and knowledge spillovers. Transport improvements are also unlikely to significantly influence locations of industries that are already highly concentrated or serve local markets.

1. DRIVERS
OF
REGIONAL DEVELOPMENT

2. IS CONNECTIVITY A DRIVER OF REGIONAL ECONOMY ???
Study of road transport connectivity pattern & economic development in Vidarbha Maharashtra dr. Sadhana h. Bhendkar (khandar)
Objective:
To compute road transport connectivity and level of
economic development in vidarbha region of
Maharashtra and to find out the relationship between
connectivity and economic development.
Methodology :
calculated by two indices, i.e. beta index and
cyclomatic number. statistical methods are use to
correlated between network and development.
By comparing Two figures we find that only Nagpur district record high connectivity and high level of development. And in two
district there is low connectivity & low level of development. There are two district where the level of development as well as the
order of connectivity both are medium. This means that in six other districts the level of development do not correspond with
their degree of connectivity.
The level of connectivity and the economic development both are correlated. The rank correlation coefficient between levels of
development and degree of connectivity is 0.24, which is statistically insignificant. This means that the development of road
connectivity are not related to the factors governing the regional pattern of economic development.

3. WHY SPATIAL INEQUALITIES EXISTS ???
Spatial inequalities in economic activity
as well as in welfare is largely the result
of decisions by individual companies or
industries to locate in selected regions of
a country.
This creates employment, generates
incomes and triggers spill overs into
rural, services and supplying sectors.
Firm’s location decision:
1. Natural advantage: where firms tend to locate in areas that have high demand for the good they
produce facilitated through good transport infrastructure and thus market access.
2. Production externalities: where firms locate in proximity to other firms to benefit, for example, from
knowledge or information transfers.
Source: Agglomeration, Transport, and Regional Development in Indonesia Uwe Deichmann, Kai Kaiser, Somik V. Lall, Zmarak Shalizi** The World Bank

4. AGGLOMERATION AND TRANSPORT CONNECTIVITY
Manufacturing firms tend to locate in regions with larger market demand to realize scale economies and minimize
transportation costs.
Low transport/connectivity costs allow larger scale production, which in turn creates investment activities in other
industries. By increasing demand for each other’s products this process of simultaneous investment raises
profitability.
Source: Agglomeration, Transport, and Regional Development in Indonesia Uwe Deichmann, Kai Kaiser, Somik V. Lall, Zmarak Shalizi** The World Bank

5. AGGLOMERATION AND TRANSPORT CONNECTIVITY
Improved accessibility and connectivity
effects in reducing geographic barriers to
interaction, which increases specialized
labour supply and facilitates information
exchange, technology diffusion and other
beneficial spill overs.
Clusters of firms that are predominantly in
the same sector take advantage of
localization economies. They include sharing
of sector specific inputs, skilled labour and
knowledge, intra-industry linkages, and
opportunities for efficient subcontracting.
If an industry is subject to such externalities,
certain firms are likely to locate in a few
regions where other producers of that
industry are already clustered.
Source: Agglomeration, Transport, and Regional Development in Indonesia Uwe Deichmann, Kai Kaiser, Somik V. Lall, Zmarak Shalizi** The World Bank

6. AGGLOMERATION AND TRANSPORT CONNECTIVITY
1. Improvements in transport will enhance regional attractiveness, which increases profits for firms.
2. If, potential profits in this region become higher than potential profits in other regions, firms will migrate
process continue until there is congestion costs (such as increases in land and labour costs) are high enough to
offset net benefits from industry relocation and the system gets back into equilibrium.
3. There may be some relocation of firms to
peripheral areas after transport improvements.
4. Highly concentrated and low sensitivity
to transport. (leather products and office
computing sectors) We find that road transport
improvements are unlikely to influence
profitability, and thus industry location decisions in
these industries
5. Transport improvements has least impact on:
• Strong agglomeration economy
• Sectors well distributed and serving local market
Source: Agglomeration, Transport, and Regional Development in Indonesia Uwe Deichmann, Kai Kaiser, Somik V. Lall, Zmarak Shalizi** The World Bank

7. Comparison of Indian states with European countries on settlement size
6,000,000
Also evenly distributed settlement pattern produces effective development.
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
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