Backwash effect: Negative effect of agglomeration if one area starts to develop, people & capital (infrastructure, finance, etc.) move, leaving other areas worse off Bvrain drainThis essentially leaves the other areas worse off than before because their best brains and capital leave them to go to the growing centre. It means that growth in one area adversely affects the growth in the other.For instance, in India, let’s say Delhi is the developing centre with all the companies being set up there. Then people from all over Haryana, Punjab, UP, Bihar etc. have a tendency to move to Delhi because all companies are located there and better employment opportunities exist. So Delhi will grow but the remaining areas will be worse off. This is Backwash effect.

Informal Sector Day workers Street vendors Prostitutes Business deals not reported to govt : Day workers Street vendors Prostitutes

Special Economic Zones Created to attract FDI Tax breaks Less environmental regulations Maquiladoras

- electronics, - furniture - toys Foreign owned plant in Mexico Cheap labor Assemble products to be sold in USA Originally 35 mi of US border Transportation – close! - Clothes, - electronics, - furniture - toys Clothes, electronics, furniture toys

Mexico has emerged as important industrial location: Cheap labor– allows USA to compete w/Asia and EU?? Less environmental regulations Close to US Stable govt.

Deindustrialization companies move jobs to other regions w/ cheaper labor that region switches to a service economy & works through high unemployment. Abandoned street in Liverpool, England, where the population has decreased by 1/3 since deindustrialization

“Call centers” like to move into deindustrialized areas: High unmplymt = low wages Low rent--- Probable tax incentives

Bad for eco development… “footloose”--can move anywhere No need for associated services Low wages offer little to a bad economy Few benefits, little ed needed