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Do neighboring municipalities matter in industrial location decisions? Empirical evidence from Spain

Author

Listed:
  • Angel Alañon-Pardo

    (Universidad Complutense de Madrid
    Instituto Complutense de Estudios Internacionales (ICEI))

  • Patrick J. Walsh

    (Landcare Research-Manaaki Whenua)

  • Rafael Myro

    (Universidad Complutense de Madrid)

Abstract

This paper focuses on industrial location, assuming that entrepreneurs not only consider the advantages associated with a certain municipality, but also those coming from nearby areas. Exploratory analysis reflects the existence of spatial patterns in the creation of manufacturing establishments and sheds light on the geographical scope on which agglomeration economies operate in industrial location. Spatial Probit models and standard Probit models with spatially lagged explanatory variables are estimated to test whether neighboring municipalities’ location decisions and characteristics, including agglomeration economies, matter in industrial location choices. Results show that neighboring municipalities location decisions and characteristics help to explain location decisions of new establishments for 11 manufacturing industries in Spanish municipalities (NUTS V) over the period 1991–1995.

Suggested Citation

  • Angel Alañon-Pardo & Patrick J. Walsh & Rafael Myro, 2018. "Do neighboring municipalities matter in industrial location decisions? Empirical evidence from Spain," Empirical Economics, Springer, vol. 55(3), pages 1145-1179, November.
    • Handle: RePEc:spr:empeco:v:55:y:2018:i:3:d:10.1007_s00181-017-1307-5
    DOI: 10.1007/s00181-017-1307-5
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    More about this item

    Keywords

    Spatial location models; Geographical scope agglomeration economies;

    JEL classification:

    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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