Since the end of World War II, manufacturing firms in the United States and in Europe have been moving farther and farther outside of central cities. At the same time, firms in finance, insurance, and other parts of the service sector have been locating near downtown areas in tall buildings. One major reason seems to be that manufacturing firms find it difficult to substitute capital for land, whereas service-sector firms that use office space do not. a. What kinds of buildings represent the substitution of capital for land? b. Why do you think that manufacturing firms might find it difficult to substitute capital for land? c. Why is it relatively easier for a law firm or an insurance company to substitute capital for land?
Since the end of World War II, manufacturing firms in the United States and in Europe have been moving farther and farther outside of central cities. At the same time, firms in finance, insurance, and other parts of the service sector have been locating near downtown areas in tall buildings. One major reason seems to be that manufacturing firms find it difficult to substitute capital for land, whereas service-sector firms that use office space do not.
a. What kinds of buildings represent the substitution of capital for land?
b. Why do you think that manufacturing firms might find it difficult to substitute capital for land?
c. Why is it relatively easier for a law firm or an insurance company to substitute capital for land?
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