The spatial structure of production with a leontief technology – II: Substitute techniques

The structure of the optimal spatial pattern of production is studied when there are dependencies among production units which can be described by a Leontief technology with substitute techniques, and when there is a single marketplace of final demand, the CBD. Transportation cost is proportional to distance. The various goods are produced in rings. There are a finite number of patterns in which these rings are arranged, and they can be obtained by a finite algorithm. The particular pattern depends on the final demand. Hence there is no ‘non- substitution’ theorem. ‘Reswitching’ of techniques can occur, that is, in an optimal pattern a technique may be operated at large and small distances from the CBD, but not at intermediate distances; this contradicts prevailing beliefs about optimal capital/land profiles.