ABSTRACT
The underlying explanatory variable in both theories is the income elasticity of demand. In the development stages theory, rising per capita income eventually results in a shift in emphasis away from primary production to manufacturing and eventually to service industries. The exchange between Tiebout and North some years ago brought to the surface some long-held opposing beliefs about the way regions grow. In his earlier model of regional/urban growth, Thompson attempted to describe various stages in the growth process not in a rigid sequential framework but rather in terms of the importance of interindustry linkages and the crucial interaction between supply and demand factors. At the regional level, the real issue, in the context of a Hartman-Seckler type model is that reduction of imports may merely raise the level of income, whereas increase in the rate of growth of export activities may raise the rate of growth of income.
