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Concentration, spatial clustering and the size of plants : disentangling the sources of co-location externalities

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  • LAFOURCADE, Miren
  • MION, Giordano

Abstract

Following the model-based approach of Ellison and Glaeser (1997), we develop a framework to test for the link between concentration, spatial clustering and the size of plants. Concentration is an a-spatial concept of variability that can be measured with the standard locational Gini or the more sophisticated Ellison and Glaeser index. By contrast, spatial clustering is directly concerned with distances. Therefore we also use a two-dimensional measure (the Moran index) to identify some specific distance-based patterns. We argue that, in a world where the size of establishments is independent of both concentration and spatial agglomeration, as the standard Dixit-Stiglitz (1977)-Krugman (1980) framework, all the variability in these measures should be accounted for by the variation in the number of plants. Using the Italian 1996 census year data on manufacturing industries, we therefore compare the values and significance of both the EG and Moran indexes computed on an employment and number of plants basis. Our results indicate that, for the majority of Italian manufacturing industries, big plants are much more concentrated than small ones, with size and concentration simultaneously influencing each other. On the other hand, small units are shown to be more spatially correlated, suggesting that different externalities may drive (or may be driven by) concentration and agglomeration patterns according to a size-related basis. These results therefore cast some doubt on the relevance of standard monopolistic frameworks to structurally account for the role of the so-called "pecuniary" externalities compared to more "localized" ones, such as Marshallian, Jacobian or factor endowments based externalities.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2003091.

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Date of creation: 00 Dec 2003
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Handle: RePEc:cor:louvco:2003091

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Related research

Keywords: concentration; spatial correlation; plants’ size; pecuniary externalities;

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References

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  1. 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, November.
  2. Gilles Duranton & Henry G. Overman, 2005. "Testing for localization using micro-geographic data," LSE Research Online Documents on Economics 581, London School of Economics and Political Science, LSE Library.
  3. Pierre-Philippe Combes & Henry Overman, 2003. "The Spatial Distribution of Economic Activities in the European Union," CEP Discussion Papers dp0587, Centre for Economic Performance, LSE.
  4. Guy Dumais & Glenn Ellison & Edward L Glaeser, 1998. "Geographic Concentration as a Dynamic Process," Working Papers 98-3, Center for Economic Studies, U.S. Census Bureau.
  5. Gilles Duranton & Diego Puga, 2000. "Nursery Cities: Urban diversity, process innovation, and the life-cycle of products," Working Papers dpuga-00-01, University of Toronto, Department of Economics.
  6. BARRIOS, Salvador & BERTINELLI, Luisito & STROBL, Eric & TEIXEIRA, Antonio Carlos, 2003. "Agglomeration economies and the location of industries: a comparison of three small European countries," CORE Discussion Papers 2003067, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  7. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
  8. Duranton, Gilles & Puga, Diego, 2005. "From sectoral to functional urban specialisation," Journal of Urban Economics, Elsevier, vol. 57(2), pages 343-370, March.
  9. Thomas J. Holmes & John J. Stevens, 2004. "Geographic concentration and establishment size: analysis in an alternative economic geography model," Journal of Economic Geography, Oxford University Press, vol. 4(3), pages 227-250, June.
  10. 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.
  11. Holmes, Thomas J. & Stevens, John J., 2004. "Spatial distribution of economic activities in North America," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 63, pages 2797-2843 Elsevier.
  12. Glenn Ellison & Edward L. Glaeser, 1999. "The Geographic Concentration of Industry: Does Natural Advantage Explain Agglomeration?," Harvard Institute of Economic Research Working Papers 1862, Harvard - Institute of Economic Research.
  13. BARRIOS, Salvador & BERTINELLI, Luisito & STROBL, Eric, 2003. "Geographic concentration and establishment scale: can panel data tell us more ?," CORE Discussion Papers 2003036, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  14. Maurel, Francoise & Sedillot, Beatrice, 1999. "A measure of the geographic concentration in french manufacturing industries," Regional Science and Urban Economics, Elsevier, vol. 29(5), pages 575-604, September.
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Citations

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Cited by:
  1. Bjoern Alecke & Gerhard Untiedt, 2006. "Die geografische Konzentration von Industrie und Dienstleistungen in Deutschland. Neue empirische Evidenz mittels des Ellison-Glaeser-Index," Working Papers 2-2006, GEFRA - Gesellschaft fuer Finanz- und Regionalanalysen.
  2. Björn Alecke & Gerhard Untiedt, 2008. "Die räumliche Konzentration von Industrie und Dienstleistungen in Deutschland," Jahrbuch für Regionalwissenschaft, Springer, vol. 28(1), pages 61-92, February.
  3. Matouschek, Niko & Robert-Nicoud, Frédéric, 2003. "The Role of Human Capital Investments in the Location Decisions of Firms," CEPR Discussion Papers 3875, C.E.P.R. Discussion Papers.
  4. Megha Mukim, 2011. "Industry and the urge to cluster: a study of the informal sector in India," LSE Research Online Documents on Economics 33592, London School of Economics and Political Science, LSE Library.
  5. R. Paci & S. Usai, 2006. "Agglomeration economies and growth-The case of Italian local labour systems, 1991-2001," Working Paper CRENoS 200612, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  6. MION, Giordano, 2004. "Input-output linkages, proximity to final demand and the location of manufacturing industries," CORE Discussion Papers 2004053, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  7. Mukim, Megha, 2013. "Coagglomeration of formal and informal industry : evidence from India," Policy Research Working Paper Series 6622, The World Bank.

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