Testing for Localisation Using Micro-Geographic Data

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Testing for Localisation Using Micro-Geographic Data

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Gilles Duranton
Henry G. Overman

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Abstract

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 localisation. 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 UK data set. For four-digit industries, we find that (i) only 51% of them are localised at a 5% confidence level, (ii) localisation takes place mostly at small scales below 50 kilometres, (iii) the degree of localisation is very skewed, and (iv) industries follow broad sectoral patterns with respect to localisation. Depending on the industry, smaller establishments can be the main drivers of both localisation and dispersion. Three-digit sectors show similar patterns of localisation at small scales as well as a tendency to localise at medium scales.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number 0540.

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Date of creation: Aug 2002
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Handle: RePEc:cep:cepdps:0540

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Article
- Gilles Duranton, 2005. "Testing for Localization Using Micro-Geographic Data," Review of Economic Studies, Blackwell Publishing, vol. 72(4), pages 1077-1106, October. [Downloadable!] (restricted)
Paper
- Duranton, Gilles & Henry G Overman, 2003. "Testing for Localisation Using Micro-Geographic Data," Royal Economic Society Annual Conference 2003 69, Royal Economic Society. [Downloadable!]
- Duranton, Gilles & Overman, Henry G., 2002. "Testing for Localization Using Micro-Geographic Data," CEPR Discussion Papers 3379, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)

Find related papers by JEL classification:
C19 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Other
R12 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
L70 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - General

This paper has been announced in the following NEP Reports:

NEP-ALL-2003-10-20 (All new papers)
NEP-ENT-2003-10-20 (Entrepreneurship)
NEP-GEO-2003-10-20 (Economic Geography)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Thomas J. Holmes & John J. Stevens, 2002. "Geographic Concentration and Establishment Scale," The Review of Economics and Statistics, MIT Press, vol. 84(4), pages 682-690, 07. [Downloadable!] (restricted)
Michael Devereux & Rachel Griffith & Helen Simpson, 1999. "The geographic distribution of production activity in the UK," IFS Working Papers W99/26, Institute for Fiscal Studies.
Other versions:
- Michael P. Devereux & Rachel Griffith & Helen Simpson, 2000. "The Geographic Distribution of Production Activity in the UK," Econometric Society World Congress 2000 Contributed Papers 1397, Econometric Society. [Downloadable!]
- Devereux, Michael P & Griffith, Rachel & Simpson, Helen, 2002. "The Geographical Distribution of Production Activity in the UK," CEPR Discussion Papers 3627, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
- Devereux, Michael P. & Griffith, Rachel & Simpson, Helen, 2004. "The geographic distribution of production activity in the UK," Regional Science and Urban Economics, Elsevier, vol. 34(5), pages 533-564, September. [Downloadable!] (restricted)
Ellison, Glenn & Glaeser, Edward L, 1997. "Geographic Concentration in U.S. Manufacturing Industries: A Dartboard Approach," Journal of Political Economy, University of Chicago Press, vol. 105(5), pages 889-927, October.
Other versions:
- Ellison, G. & Glaeser, E.L., 1994. "Geographic Concentration in U.S. Manufacturing Industries: A Dartboard Approach," Working papers 94-27, Massachusetts Institute of Technology (MIT), Department of Economics.
- Glenn Ellison & Edward L. Glaeser, 1994. "Geographic Concentration in U.S. Manufacturing Industries: A Dartboard Approach," NBER Working Papers 4840, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)

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