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Testing for Localization Using Micro-Geographic Data

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Author Info
Duranton, Gilles
Overman, Henry G.

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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 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 UK data set. For four-digit industries, we find that (i) only 51% of them are localized at a 5% confidence level, (ii) localization takes place mostly at small scales below 50 kilometres, (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.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3379.

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Date of creation: May 2002
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Handle: RePEc:cpr:ceprdp:3379

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Related research
Keywords: clusters; K-density; localization; spatial statistics;

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Find related papers by JEL classification:
R12 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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References listed on IDEAS
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  1. 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.
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  2. 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.
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  3. 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)
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