Population concentration and the clustering of particular industries also allows for the pooling of workers, which results in local business needs and workers' specific skillsets becoming better aligned. Such specialization also allows for knowledge spillovers and greater exchange of ideas, as similar firms can more easily and dynamically interact with one another. This can assist in gaining a comparative advantage with respect to a particular industry or sector, which can be especially beneficial for realizing gains from trade when interacting with other communities and regions which are not as specialized, thus resulting in more geography-based disparities in economic activity.
Natural resource availability affects industry prevalence, as economic activities which are heavily dependent on specific natural resources tend to cluster around suitable geographical regions and climates.
Localities which have a heavy reliance on agricultural jobs require favorable climate conditions for crop production and harvesting. For instance, empirical evidence from Ghana points towards the impact of such spatial inequities on the quality of natural resources available. Although employment in the northern regions of the nation is heavily reliant on the agricultural sector, there is limited access to irrigation and modern implements needed for efficient farming. Such unsustainable farming practices have led to natural resource depreciation over time, including lower quality of soil and higher rates of erosion, which in turn impacts the region's ability to continue engaging in future crop production. In addition, in the face of erratic weather patterns, global warming, and climate change, these challenges have been exacerbated by distorted rainfall patterns and increasingly frequent crop failures.
Regions with access to strong transportation networks (including highways, railways, airports etc.) are more likely to benefit from external trade in comparison to remote regions. As transportation costs and logistics inform much of the clustering of economic activity within a region, the geographical concentration of particular industries informs the extent to which particular physical infrastructures must be developed and invested in to support the needs of specific localities.
Social infrastructural components, which impact health and education standards (hospitals, schools, public libraries, etc.) additionally influence quality-of-life conditions and the well-being of workers, and thus their choices with respect to selecting regions/ communities to live in. As such, city planning and the provision of public infrastructure and services remains essential to public policy considerations for rapidly urbanizing communities.
In particular, people living in regions with poor infrastructure and public services are at a greater risk of poor health and wellbeing. This includes limited access to both healthcare, as well as quality and nutritious food. Such impacts compound over time, leaving individuals to become more susceptible to future health problems and illnesses. For instance, the spatial patterns of such environmental factors and hospital accessibility can impact public health outcomes, such as COVID-19 infection, spread, and mortality rates within a nation.
Furthermore, as families of similar incomes tend to cluster, further segregation of socio-economic classes is propagated by schooling environments. This adversely effects the opportunities available to children from low-income backgrounds, and reduces the ability for social mobility needed to escape the poverty trap and generational poverty. An example of this phenomenon in the United States includes redlining - a racially discriminatory historical practice, which resulted in subprime mortgages becoming highly concentrated to specific neighborhoods and geographies.
There remains no academic consensus on whether trends in spatial inequalities over time are causes of region-based differences in income, or rather the symptoms of other socio-economic disparities. Furthermore, the complex and intertwined relationships between geographical features, urbanization, availability of infrastructure, and access to public resources further complicates empirical research.
While nominal wages tend to be higher in cities and urban regions, the same is not necessarily true of real wages, as rising housing costs and expenses tend to offset these benefits.
The availability and reliability of local data remains a barrier to accurate estimation in academic studies. The typical limitations of econometric studies may also impact the soundness of empirical results and conclusions. As such, there remains no unified theory within economic geography to provide a broadly accepted causal explanation for spatial inequality.
In particular, an inherent difficulty in comparing urban and rural regions is the vast disparity in quality and variety of goods and services enjoyed by the typical household in either type of community. Furthermore, differences in disposable income and composition of spending pose further challenges to comparative approaches.
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