Economic Geography: Where Things Are Made and How They Move

What is economic geography?

Economic geography is the part of human geography that asks: where do people produce, trade and consume, and why there?

• It links economy and nature: soil, climate, rivers, minerals and coasts shape what is produced, and production changes nature (pollution, land use).
• It uses maps, statistics and models: for example, a simple cost model compares transport costs of different sites (try it in the 3D).
• It works at many scales: local (a market town), national (industrial regions) and global (world trade).

Sectors of the economy and production spaces

• Primary: takes from nature: farming, fishing, forestry, mining. Farming spaces are fields, orchards, plantations.
• Secondary: makes goods: factories, building, energy plants. Industrial spaces are industrial estates, ports, technology parks.
• Tertiary: services: shops (retail), transport, banks, health, tourism, software. Business spaces are city centres and office districts; tourist spaces are beaches, mountains, heritage towns.
• Quaternary (sometimes added): research, information, high-tech ideas.

As countries get richer, the share of workers usually moves from primary → secondary → tertiary. Today most workers in rich countries are in services.

Why industries locate where they do

A firm picks the place where total costs are low and sales are high.

• Raw materials: heavy, bulky inputs (iron ore, coal, sugar cane) pull factories close to them.
• Energy: cheap, steady power (hydro, coal, gas, solar). Energy security means not depending on one risky supplier.
• Labour: enough workers with the right skills at a suitable wage.
• Market: buyers nearby (fresh food, heavy finished goods, services).
• Transport: ports, highways, railways, airports. Coasts win because ships are the cheapest way to move heavy goods.
• Government: tax breaks, special economic zones, rules.
• Clustering: firms gather near suppliers and similar firms (agglomeration), like electronics clusters.

A country's competitive advantage is what it does relatively well, e.g. fertile farmland, metal ores, or cheap skilled labour.

Value chains and the international division of labour

A value chain is all the steps from idea to customer: research and design → raw materials → parts → assembly → transport → marketing → sale → after-sales service.

In a global value chain, each step happens where it is cheapest or best. A passenger jet, for example, may have wings from one country, engines from another and final assembly in a third, linked by special transport.

The international division of labour is this sharing of work between countries: some mainly export farm goods or metals, some assemble electronics, some design and finance. Value is lowest in the middle (simple assembly) and highest at the ends (design, brand, sale): the "smile curve".

Common industry types: heavy (metals, machinery, vehicles, aircraft), high-tech (electronics, medicines), light (clothes, shoes) and food processing.

Actors: multinational firms and public actors

• Multinational (transnational) firms work in many countries. Head office and research often stay in a big city; factories and call centres go where costs are lower.
• Public actors: national governments, regions and cities build ports and roads, train workers, give tax breaks and set environmental rules.
• Other actors: small and medium firms, workers and unions, consumers, banks and investors.
• Digital economy: online shops, apps, cloud services and platforms. They need data centres, cables and warehouses, so even "virtual" work has a geography.

Flows, metropolises and coasts

Material flows: goods in containers, oil in pipelines, food in trucks. Immaterial flows: money, data, ideas, services like software (IT outsourcing) or call centres.

Transport corridors link ports, cities and industrial zones by road, rail and water.

Metropolises (very big cities) collect head offices, finance, research, airports and skilled people. Coasts collect port industries: refineries, steel, car assembly, logistics parks.

Because firms can move, places compete: they offer good transport, skills, quality of life and low taxes. Each country tries to fit its production system into world trade.

Change: restructuring, urbanisation and sustainability

Restructuring: old heavy-industry regions (coal, steel, shipbuilding) may lose jobs when factories close or move. They can recover with new industries, services, tourism or research parks.

Growth regions rise fast when factories and investment arrive, as in many East Asian cities; towns grow into cities (urbanisation).

To compare places we use indicators: GDP per person, share of workers in each sector, life expectancy, schooling and the Human Development Index.

Sustainable development means growing without harming the future: cleaner energy, recycling, fair wages and investment in skills.

Key formulas and definitions

• Key terms: primary, secondary, tertiary, quaternary sector; value chain; multinational firm; agglomeration; flows; metropolis; restructuring
• Location factors: R-E-L-M-T (raw materials, energy, labour, market, transport) + government
• Transport cost of a site = Σ (distance × cost per km) for each input and output
• Value added at a step = value after the step − value before it

Worked examples

Common mistakes

• Thinking a product is made in one place. Most are made in global value chains.
• Forgetting immaterial flows. Money, data and services move too, not only goods.
• Saying factories always go where wages are lowest. Transport, skills, markets and rules matter as much.
• Calling every office job 'secondary'. Services are tertiary; only making goods is secondary.