Testing for Localization Using Micro-Geographic Data

To study the detailed location patterns of industries, and particularly the tendency for industries to cluster relative to overall manufacturing, we develop distance-based tests of localization. In contrast to previous studies, our approach allows us to assess the statistical significance of departu...

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Bibliographic Details
Published in:The Review of economic studies 2005-10, Vol.72 (4), p.1077-1106
Main Authors: Duranton, Gilles, Overman, Henry G.
Format: Article
Language:English
Subjects:
Data analysis
Distribution
Empirical research
Employment
Geodetic position
Geography
Industrial concentration
Industrial plants
Industrial sectors
Industrial sites
Industry
Industry analysis
Leather industry
Localization
Location analysis
Location of enterprises
Location of industry
Manufacturing
Manufacturing industries
R11
R23
Regional economics
Space economics
Spatial models
Statistical analysis
Statistical significance
Studies
Textile industry
United Kingdom
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Summary:To study the detailed location patterns of industries, and particularly the tendency for industries to cluster relative to overall manufacturing, we develop distance-based tests of localization. In contrast to previous studies, our approach allows us to assess the statistical significance of departures from randomness. In addition, we treat space as continuous instead of using an arbitrary collection of geographical units. This avoids problems relating to scale and borders. We apply these tests to an exhaustive U.K. data-set. For four-digit industries, we find that (i) 52% of them are localized at a 5% confidence level, (ii) localization mostly takes place at small scales below 50 km, (iii) the degree of localization is very skewed, and (iv) industries follow broad sectoral patterns with respect to localization. Depending on the industry, smaller establishments can be the main drivers of both localization and dispersion. Three-digit sectors show similar patterns of localization at small scales as well as a tendency to localize at medium scales.
ISSN:0034-6527
1467-937X
DOI:10.1111/0034-6527.00362